Gold price dips on speculation new Federal Reserve chief will be a hawk

October 24, 2017

London (Oct 24)  Gold dipped on Tuesday as investors nervously awaited news on the new head of the US central bank, while strong share markets and a calmer geopolitical environment sapped safe-haven demand.

"The hawkish speculation about a new Fed chair has added some downside pressure," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

US President Donald Trump told reporters on Monday he was "very, very close" to making his decision on who should chair the US Federal Reserve.

A hawkish candidate would be expected to favour higher interest rates, boosting the value of the dollar and making the greenback-denominated metal more expensive for holders of other currencies.

Spot gold slipped 0.2% to $1,279.01 an ounce by 10am GMT, after hitting its lowest since October 6 at $1,271.86 in the previous session.

US gold futures for December delivery fell 0.1% to $1,280.02/oz.

Spot gold has shed 6% since touching a one-year high of $1,357.54 on September 8, largely due to a rebound in the dollar on expectations that the Fed will boost interest rates in December.

The Fed will raise rates in December and twice next year, according to a Reuters poll of economists, who now worry that the central bank will slow its tightening because of expectations that inflation will remain low.

"Stocks, even though we had a correction yesterday, are holding near record highs, removing some of the demand on that front. Geopolitics have faded a bit recently and that has added to the downwards move," Hansen said.

MSCI’s 47-country world share index hovered near its recent all-time highs after a drop in General Electric shares on Wall Street had seen the ViX volatility index spike up.

"I’m very surprised we’re up here. Risk is still on if you look at stock markets. Generally gold should be lower … I was expecting gold to drift down to $1,260 area," said the Hong Kong-based trader.

"We’ll probably consolidate around $1,275-$1,285 until some Fed news comes out."

Reuters technicals analyst Wang Tao, however, said spot gold may break a resistance at $1,283/oz and rise into a range of $1,289-$1,295.

In other precious metals, silver was up 0.2% to $17.08/oz after hitting its lowest since October 9 in the previous session.

Platinum was up 0.5% at $926/oz and palladium rose 0.7% to $966/oz.


Silver Phoenix Twitter                 Silver Phoenix on Facebook