Gold is unchanged in the Wednesday session. In North American trade, the spot price for an ounce of gold is $1276.71, up 0.01% on the day. On the release front, US numbers impressed as durable goods orders accelerated in September. Core Durable Goods Orders gained 0.7%, above the estimate of 0.5%. Durable Goods Orders soared 2.2%, crushing the estimate of 1.0%. As well, New Home Sales jumped to 667 thousand, well above the forecast of 555 thousand. On Thursday, the US releases unemployment claims and Pending Home Sales.
Gold prices remain steady this week, after the metal slipped 1.9 percent last week. The sharp drop was in response to solid data last week, as employment, manufacturing and housing data beat their estimates. On Friday, the US releases Advance GDP for the third quarter, and the markets are expecting a strong gain of 2.5 percent. If the GDP reading is not within expectations, we could see some strong movement in gold prices.
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, Federal Reserve Governor Jerome Powell, and Yellen. Taylor advocates a rule in which interest rates could 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.
