Gold has posted sharp losses in the Thursday session, erasing the strong gains which marked the Wednesday trading. In North American trade, the spot price for an ounce of gold is $1337.67, down 1.14% on the day. In economic news, unemployment claims dropped to 233 thousand, within expectations of the estimate of 231 thousand. On Friday, the US releases the UoM Consumer Sentiment report.
It’s been a roller-coaster ride for gold over the past two days, marked by sharp gains and losses for the base metal. Tensions in the Middle East remain high, and gold prices soared higher on Wednesday, as US President Trump promised to punish the Syrian regime for an alleged chemical attack by government forces last weekend. For its part, Russia has countered that it will respond to any US move against Syria. The markets were braced for an imminent US air strike, but investors have regained some risk appetite on Thursday after Trump tweeted that a US response could come “very soon or not so soon at all.” With the possibility that Trump’s bite might not follow his bark, gold has become less attractive and dropped sharply on Thursday.
The Federal Reserve minutes had a generally hawkish tone, reflective of a solid US economy. All of the Fed policymakers indicated that the US economy would continue to improve and that inflation would rise in the next few months. At the March meeting, the Fed unanimously voted to raise rates by a quarter-point, bringing the benchmark rate to a range between 1.50% and 1.75%. The Fed projection for rate policy in 2018 remains at three hikes, although there is speculation that the Fed could revise the forecast to four rate hikes. Last week, Fed Chair Jerome Powell said that the Fed would likely continue to raise rates in order to keep a lid on inflation, but added that the rate moves would be gradual. A new headache for the Fed is the escalating trade battle between the US and China, which could hurt the economy and raise consumer prices. As for the next two rate meetings, the markets expect Powell & Co. to sit tight in May and raise rates at the June meeting.
