Gold has posted strong gains in the Wednesday session. In North American trade, the spot price for an ounce of gold is $1324.61, up 1.02% on the day. On the release front, the current account deficit widened to $128 billion, above the estimate of $125 billion. In economic news, the US, the current account deficit widened to $128 billion, above the estimate of $125 billion. On the housing front, Existing Home Sales jumped to 5.54 million, easily beating the estimate of 5.41 million. All eyes are on the Federal Reserve, which is expected to raise the benchmark rate to a range of between 1.50% and 1.75%. On Thursday, the US releases unemployment claims.
Gold prices continue to show movement ahead of the Federal Reserve rate announcement later on Wednesday. The meeting will mark a host of firsts – the Fed is expected to raise rates for the first time in 2018, and Fed Chair Jerome Powell will preside as chair of the FOMC for the first time, followed by Powell’s first post-FMOC press conference. The Fed has sounded marginally more hawkish recently – will this trend continue in the rate statement? The Fed rate projection remains at three rates for 2018, but with the US economy continuing to perform well, this forecast could be revised upwards to four rates. If the rate statement is unexpectedly hawkish, gold could give up some of Wednesday’s gains.
After months of rough rhetoric between Britain and the EU, the two sides announced that there would be a transition period following the UK’s departure from the EU in March 2019. The transition deal will kick in at that time, lasting until December 2020. The deal covers the rights and status of EU citizens in the UK and British citizens in the EU, and allows the UK to pursue new trade agreements during that time. There are still some issues to iron out, such as the Northern Ireland border. The transition period is a major, positive development, in that it will enable Britain to enjoy the benefits of the common market, albeit without a seat at the table. The positive news could raise investor risk appetite and weigh on gold prices.
