Gold has lost ground in the Tuesday session. In the North American session, the spot price for an ounce of gold is $1275.72, down 0.48% on the day. On the release front, Richmond Manufacturing Index slowed to 12 points, well off the forecast of 19 points. This marked its weakest gain since June. In the US, there are two key events – Core Durable Goods Orders and New Home Sales.
Gold prices have steadied this week, after the metal slipped 1.9 percent last week. Investor risk appetite increased as the US posted strong numbers last week, as employment, manufacturing and housing data beat their estimates. As well, the growing possibility that John Taylor could become the next head of the Federal Chair has hurt gold, as Taylor is considered a strong proponent of higher interest rate levels.
Who will take over at the Federal Reserve? The markets are keeping close tabs on the central bank, as Janet Yellen’s 3-year term expires in February. President Trump has said he will nominate a new Fed head in the coming days, and the front runners are economist John Taylor and Federal Reserve Governor Jerome Powell. Taylor advocates a rule in which rates which be as high as 3 percent, given current economic conditions. Powell is more closely aligned to Fed Chair Janet Yellen’s monetary stance which advocates an incremental increase in rates. With the two candidates representing sharply differing views on interest rate levels, Trump’s choice for the new Fed chair could have an effect on monetary policy and the strength of the US dollar. Still, most economists are of the view that monetary policy will be largely driven by the performance of the US economy. Inflation levels remain weak and may not reach Fed’s target of 2 percent before 2020, but that has not dampened expectations of a December rate hike. According to CME FedWatch, the odds of a raise in December stand at 96 percent.
