Gold is down for a third consecutive day. In the North American session, the spot price for an ounce of gold is $1279.79, down 0.39% on the day. On the release front, the focus was on housing data, and the September numbers were soft. Building Permits slowed to 1.22 million, shy of the estimate of 1.25 million. Housing Starts dropped to 1.13 million, missing the forecast of 1.18 million. On Thursday, the US will publish unemployment claims and the Philly Fed Manufacturing Index.
It’s been a rough week for gold, which has dropped 1.8 percent. The metal has been under pressure following reports that President Trump is leaning towards nominating economist John Taylor as the new head of the Federal Reserve, after Fed Chair Janet Yellen’s term ends in February 2018. Taylor is considered more hawkish on policy than the current head, Janet Yellen, and Taylor’s monetary stance would see interest rates substantially higher than the current 1.25%. A more hawkish Fed under Taylor could be inclined to raise interest rates early in 2018, despite weak inflation, which would strengthen the greenback against gold. Other candidates for the Fed Chair include current Fed Governor Jerome Powell and former Fed official Kevin Warsh.
The Federal Reserve is on track for a third and final rate hike in 2017. Fed Chair Janet Yellen has sounded positive about the economy and says that she expects inflation to move higher. The markets have picked up on this message, and the odds of a December hike have jumped to a sizzling 91 percent. Just one month ago, the odds were 50-50 that the Fed would raise rates at the December meeting. Low inflation levels have been a key reason that the Fed has been reluctant to raise rates, but policymakers insist that inflation will move closer towards the Fed’s inflation target of 2 percent.
