Long term looks favorable for Gold

Gold has fallen out of favour as investors prefer havens such as the dollar, Treasuries and yen amid fears that a looming trade war will damage global growth, hurt earnings and drag down stock markets and other risk assets. 

Gold has not fared well lately despite rising global trade tensions that have knocked down equities. Gold has been hurt by expectations for more Federal Reserve hikes complemented by a strengthening US dollar which further pulled down gold prices.

Many believe that gold has lost its shine. Each time it gets close to break the $1350 level, it fails and is unable to generate returns in a rising yield environment and the biggest obstacle for the yellow metal currently is the rally in US dollar .

Hence, precious metal’s “biggest disappointment” this year has been that it keeps failing to attract safe-haven inflows in a meaningful way.

Some even believe that gold has not bottomed out yet and there is further scope for a downfall as gold is oversold. With gold back to trading near six-month lows and prices struggling to catch a break during the past few weeks, analysts are saying that gold is failing to attract safe-haven interest due to a surging U.S. dollar.

However, given the recent equity-market correction and talk of a trade-driven slowdown in the global economy, it is likely that the market will start to get a lot less enthusiastic about aggressive Fed tightening and the US dollar. On the positive note, the interest-rate environment is becoming more favourable for gold, with inflation expectations rising — a good sign for the precious metal that has traditionally been viewed as an inflation hedge,

The Federal Reserve will probably raise interest rates two more times this year, and twice in 2019, while the European Central Bank will likely start tightening in September next year. That should shift the monetary policy divergence in favour of the euro relative to the dollar and be positive for gold in the greenback.

On top of that, lower gold prices might encourage more physical buying in key markets, including China and India.

So in the long term things look favourable for gold and the yellow metal might once again get into the safe haven mode.

Trade war fails to weaken the dollar

Gold prices have not managed to stay above the $1300 level- it could be due to a strong dollar or maybe profit taking or even price manipulation. Currently, out of all, gold prices seemed to have been highly influenced by a strengthening dollar.

Gold prices fell to new 2018 lows against a rising Dollar on Tuesday in London, hitting $1274 per ounce as President Trump threatened to hit back at China's retaliation over last week's new US trade tariffs with extra charges on another $200bn of Chinese imports.

Accused of "blackmail" by Beijing, Trump says these extra 10% tariffs will only come into force if China “refuses to change its practices."

This news gave a boost to gold in the Asian markets.

However the metal failed to extend further as offers [to sell around] $1283 restricted top-side gains.

Gold remains bearishly offered, and it’s all about the dollar strength as the greenback rockets higher on EM commodity and the China meltdown. And at least for the time being the markets have utterly forsaken the idea that the US trade war escalation could become ultimately detrimental for the dollar.

Now currently the matter of concern is that why is the dollar showing sign of strength despite an apparently escalating trade war which is unlikely to do anyone any good?

At the moment the dollar strength is two-fold. Key currencies like the Euro, the British pound, the Canadian and Australian dollars and the Chinese Yuan are being driven downwards (hence the dollar appears to be rising), but also money will be flowing into the dollar as perhaps more of a safe haven in times of an ensuing global financial crisis than gold and other precious metals.  We think that this will only be in the short term and we need to wait for some concrete events that will bring in volatility in the markets.

Fed Rate Hike Fails to Dampen Gold Prices

After two days of meetings regarding monetary policy, the US Federal Reserve officially announced the second interest rate hike of the year on Wednesday, June 13.

The Fed lifted the target federal funds rate by 25 basis points, from 1.75 to 2 percent, but the increase had little impact on gold, which remained just below the psychological barrier of US$1,300 per ounce
The US Federal Reserve raised interest rates on Wednesday, and signaled two additional hikes by the end of this year, compared to one previously. Expectations of further US interest rate increases lowers demand for the non-interest-paying asset. Gold as expected to drop post a rate hike, but nothing like that happened.

Gold prices were higher on Thursday, rising above the $1,300 level as the dollar lost the momentum from a decision by the U.S. Federal Reserve to raise interest rates.
Gold prices jumped to $1,303.2 from below the $1,300 level overnight after the Fed’s rate hike decision hit the markets. The prices have held on well above the $1,300 level since then.

Gold prices are denominated in U.S. dollars, so the movement of the U.S. dollar index impacts the gold price. On Thursday, the U.S. dollar index that measures the greenback’s strength against a basket of six major currencies was down 0.03% to 93.53, giving up gains despite a promising outlook for the U.S. economy.

This no reaction movement in gold prices was because a lot of safe-haven demand is expected to take place. The trade war drama is not going to end anytime soon, it is probably going to be exasperated over the next month or so as the geopolitical uncertainties have not been resolved yet.

Rounding out the Fed’s meeting comes the knowledge that the central bank expects US GDP to grow by 2.8 percent in 2018, with economic activity projected to expand by 2.4 percent in 2019. Overall, the economy is expected to grow 2 percent in 2020. The median average of the central bank’s updated forecasts rose from March’s projection to 2.8 percent.

In addition to Wednesday’s interest rate hike, the markets are also reacting to the Fed’s guidance regarding future interest rates. Reports that US President Donald Trump will meet with his top trade advisers on Thursday to decide whether to activate threatened tariffs limited gold’s losses.

Reports that President Trump was preparing to put tariffs on billions of dollars of Chinese goods as soon as Friday raised concerns in the market that economic growth would be impacted. This saw some safe-haven buying emerge and saw gold prices not dropping cosiderbly in spite of a rate hike.

Gold might rally soon

Gold has performed quite well over past few years.  In late 2015 it touched $1,050 an ounce, it had a nice progression into 2016 and 2017. Here we are in 2018, and the gold price has been up above $1,300 through most of the year, and it looks like it’s very well supported, for varied reasons.

There are many factors that are influencing or rather supporting gold at this point of time.

Gold has actually been in a rather tight trading range, trading from the upper $1,200s to $1,300 an ounce to $1,370 an ounce, probably because there’s the view in the marketplace that there’s other opportunities, whether it’s in other equities or perhaps small-cap stocks, biotech, cannabis stocks or cryptocurrency-type stocks. And yet gold is doing what it’s supposed to do, it’s providing a hedge to monetary policy. Year-to-date, the dollar has been quite weak, and gold has actually done quite well.
Gold has been rising along with inflation, oil prices and commodity prices. Gold market is actually “rather constructive” right now due to a number of factors, including the amount of credit that’s being created and the recent US tax bill.

 I think it’s had a number of attempts to break through that $1,365 or $1,370 mark and it might break through this level in 2018. There are definitely many aspects that are building whether it’s the deficits or the geopolitical environment. Gold was very responsive in March over the Syrian attacks and with the North Korean developments, but due to certain political uncertainties in the US, it was actually difficult to understand US’s political agenda which has kept the gold prices underpinned.

Until then, gold seems to have carried the green territory forward in the past week too. Gold prices posted the largest one-day gain in six weeks as global risk aversion sent capital flows rushing to the safety of Treasury bonds. That pushed yields lower and bolstered the relative appeal of non-interest-bearing alternatives epitomized by the yellow metal.

Gold prices surged on Thursday, propelled above $1,300 per ounce as the U.S. dollar weakened, after U.S. President Donald Trump called off a summit with North Korea, stoking political tensions. Trump cancelled the meeting with Kim Jong Un, planned for June 12, even after North Korea followed through on a pledge to blow up tunnels at its nuclear test site. The cancellation prompted investors to seek a safe store of value. Rising demand for the yellow metal pushed its prices higher.           
Spot gold gained 0.9 percent at $1,305.18 per ounce during Thursdays trading hours. Gold got momentum on news the North Korea meeting was cancelled but Before the North Korea news, spot gold was slightly firmer but had been losing ground for weeks, shedding 5 percent since touching $1,365.23 on April 11, the highest in nearly three months.

Currently, it’s a bit difficult to find any factor that would go against gold and influence its prices downward. The glittering metals safe haven appeal also glittered after the U.S.launched a national security investigation into car and truck imports that could lead to new tariffs similar to those it imposed on steel and aluminium.           
 
Furthermore, Turkey has been in the spotlight and the lira weakened more than 2 percent, the day after a huge emergency interest rate hike intended to stem its slide.       
  
Gold was also buoyed by a weaker dollar, which slipped to a near two-week low against the Japanese yen, and lower U.S. Treasury yields. Adding to the rally, we saw the minutes of the Fed meeting that were les hawkish on interest rates.

And if these reasons aren’t enough, the bullishness is also related to the fact that US' expansionary phase is in the late cycle.

Gold has historically rallied even after business cycle starts to turn. And also rallied even if the US economy starts to fall into recession and currently Dollar strength looks as f it will fade away soon.
We might also see the European and Japanese market strengthening which might further weaken the dollar and create an inverse relation with the yellow metal this creating a rally in gold prices once again.

The markets’ mood soured as President Trump called for a similar probe into auto imports that preceded the recent steel and aluminium tariff hike. Canada is a major importer of motor vehicles into the US, so the move casts a cloud over NAFTA renegotiation efforts. He then cancelled a June summit with North Korea’s Kim Jong-un, ominously hinting that the US military is prepared to take whatever action necessary.

The gold price may not be as high as some investors want it to be, but according to Doug Groh, portfolio manager at Tocqueville Asset Management, the yellow metal is performing just as it should be.

“Gold is doing what it’s supposed to do, it’s providing a hedge to monetary policy,” he said at the sidelines of the recent Mines and Money conference in New York.

Groh emphasized that it’s important for investors to remember that gold is “not necessarily supposed to [put on] a performance in a portfolio … it’s a sense of security and store of value.” He added, “Gold offers an alternative in a portfolio in that it’s not correlated to other assets.”

Gold expected to rise moderately

While gold has primarily been stuck within the US$1,310 to $1,350 range this year, it managed to rise 3.61 percent during Q1 2018.

The yellow metal gained some first-hand experience in market volatility during the period, as inflation gave it boosts while US Federal Reserve interest rate hikes brought pressure down
On the other hand, United states willingness to resolve an escalating trade fight with China, pulled back gold prices from one week highs reached in the earlier trading sessions.

The United States voiced willingness on Wednesday to talk with China after Beijing retaliated against proposed U.S. tariffs on $50 billion in Chinese goods by targeting key American imports.
As investors pulled out of gold, Asian equities rebounded from two-month lows with investors hoping a full-blown trade war between the world’s two biggest economies can be averted.

Spot gold was down 0.3 percent at $1,329.11 per ounce by 0409 GMT, after touching a one-week high of $1,348.06 on Wednesday.

But what looked like an eased out situation, became a bit tense after economic numbers came in from U.S. Gold prices rose on Friday, as Wall Street stocks tumbled and the dollar fell as rhetoric from U.S. President Donald Trump and Chinese officials fed worries about a possible trade war, and after U.S. jobs data came in weaker than expected.

U.S. stocks fell, with the Dow down more than 450 points, after Trump on Thursday threatened to slap $100 billion more in tariffs on Chinese imports, and Beijing pledged a “fierce counter strike”.
Falling stock prices dragged the dollar against the yen and the euro. Also pressuring the U.S. currency was data showing the U.S. economy in March created the fewest jobs in six months, which might prompt the Federal Reserve to go more slowly on plans to raise interest rates.

An intense trade war between US and China kept gold exposed to fluctuations. And hence the market is paying very much attention to the dollar and bond market in terms of what the Fed is going to do.
While any escalation in geopolitical tensions will raise the demand for the yellow metal, we already see an increase in the demand from the Indian markets.  Though demand for gold in whole of Asia was muted, there is a slight pick-up in buying in India ahead of the wedding season and a key festival.

This month Indians will be celebrating the annual festival of Akshaya Tritiya, when buying gold is considered auspicious.

Moving back to global worries, gold in the near term is exacted to raise moderately – Reasons being

• A weakening US dollar: A tightening monetary policy in Euro zone will result in the US dollars downtrend. And changed in the US fiscal policy will also have negative effect on US dollar, thus proving to be positive for gold.  The US dollar’s downtrend will resume later in the year. “One key reason behind this is the impending tightening of monetary policy in the Euro zone, given that the euro accounts for nearly 60% of the dollar index,” the report states. It also mentions changes to US fiscal policy, which could have a ripple effect on the US dollar yield curve.
• Volatility in equity markets. - The markets are too optimistic and bullish for equities and this over confident attitude could backfire, resulting in spiking gold prices.

These not so extreme, but moderately influential factors might spike gold prices in the near term but not to a great extent.

A bad week but a good quarter for gold

It wasn’t a much pleasant week for gold as it posted its biggest one-day percentage fall in nearly 9 months.

On Wednesday, the yellow metal suffered its biggest one-day loss since February to settle at a one-week low, reacting to a firmer dollar as it deepened a pullback from the more than one-month highs seen earlier in the past week.

Though there was a moderate weakness seen in the US dollar, the yellow metal didn’t much benefit from it. Gold continued to remain under some selling pressure consecutively on Wednesday and failed to employ any positive movements.

Wednesdays’ fall saw gold retreating around 2.5% from near 6 week tops that it touched on Tuesday. Gold posted its biggest one-day percentage fall in nearly nine months on Wednesday after robust U.S. data lifted the dollar, which steadied at those strong levels on Thursday.
   
Gold prices are currently flat after a big move down on Wednesday. The culprit for the move in gold appears to be recent strength in the US dollar. As gold is traded against US dollars, a stronger currency pushes down the precious metal in relative terms.

Even the ongoing slide in the US Treasury bond yields did little to lend any support and stall the non-yielding yellow metal's downfall to over one-week lows.

On the other hand, the European equity markets created bullish sentiments for gold. Furthermore, gold prices held largely steady on Thursday, as tensions over North Korea and global trade eased.
 
North Korea's leader Kim Jong Un pledged his commitment to denuclearisation and meet U.S. officials, China said on Wednesday after his meeting with President Xi Jinping, who promised China would uphold friendship with its isolated neighbour.

Gold prices slipped on Thursday as the U.S. dollar held its strong gains from the previous session, but simmering tensions over Russia and a potential trade war offered underlying support.

Moscow threatened to retaliate after the United States and other Western countries expelled more than 100 Russian diplomats over the poisoning of Russian former double agent Sergei Skripal and his daughter in England with a military-grade nerve toxin.
                         
Though gold had a bad week, but for the quarter gold fared well. Often seen as an alternative investment at times of political and financial uncertainty, gold was on track for a third straight quarter of gains, up 1.7 percent as of Thursday as United States precious metals markets were closed on Friday for the Good Friday holiday.

While spot bullion was little changed at $1,325.17 an ounce on Thursday, the metal was up 1.7 percent this quarter, following a 1.8 percent gain in the final three months of last year. The rise comes even as the Federal Reserve has been pulling the trigger consistently on U.S. interest rates and despite Wednesday falling by the most since July.

Gold’s haven qualities have come back in focus this year as a series of events were witnessed-

• President Donald Trump’s administration picked a series of trade fights with friends and foes escalating global tensions.
• Investors worry about equity market wobbles that started on Wall Street and echoed around the world. 
• Geopolitical tensions with North Korea 
• Trump’s pick of John Bolton as his new national security adviser spurred speculation of a potentially harder line against Iran

As these series of events will increase safe haven buying in gold, what raises concerns is whether this rising demand will be met. Furthermore growing geopolitical risks could concerns of supply-side issues in the oil market.

A turbulent week for gold

It was certainly a turbulent week for the yellow metal, as the combination of political uncertainty and U.S. rate hike expectations attracted both buyers and sellers. Though there was lot of volatility in the market, the precious metals continued to hold a well-defined range after turning sharply from key support last week and prices struggled to hold on to the early March gains.

On Friday, gold managed to pare some of its early losses to fresh weekly lows but held in negative territory through the mid-European session.

Gold prices extended losses into a third session on Friday as the dollar strengthened against the yen on hopes of easing tensions between the United States and North Korea and ahead of U.S. non-farm payroll data later in the day.

U.S. President Donald Trump said on Thursday he was prepared to meet North Korean leader Kim Jong Un for the first U.S.-North Korea summit, marking a potentially dramatic breakthrough in nuclear tensions with Pyongyang.

A combination of diverging factors has failed to provide any meaningful drive and has led to subdued/range-bound price action. The rampant watchful sentiment around European equity markets was seen lending some support to the precious metal's safe-haven appeal and helped bounce off lows.

However, a follow-through US Dollar buying interest, supported by a goodish pickup in the US Treasury bond yields might continue to keep a lid on any further meaningful up-move for dollar-denominated commodities - like gold.

Investors were glued to the keenly watched US monthly jobs report, which was expected to influence Fed rate hike expectations and eventually provide some fresh impetus for the non-yielding yellow metal's near-term trajectory.

Once data was released there was lot of upheaval in the market.

• A strong jobs report on Friday offered some support to gold prices with U.S. Non-Farm Payrolls (NFP) topping expectations with a print of 313K for the month of February.
• A strong read on labour force participation also highlighted underlying strength in the employment sector with a print of 63% (highest since September). 
• Despite the job gains however, wage growth remained sluggish a downward revision to last month’s average hourly earnings accompanied by a miss in February at just 2.6% y/y (previously 2.8% y/y). 

The release is unlikely to alter the Federal Reserve’s expectations for three rate-hikes this year with gold finding solace into the close of the week.

Gold prices ended higher Friday, erasing their loss for the week, as monthly data revealed a strong rise in U.S. jobs, but disappointing growth in wages.

The U.S. dollar weakened in the wake of the employment data. Gold and the greenback often move inversely as a weaker dollar can raise the appeal for investors using other currencies to buy the precious metal.

The latest snapshot of the U.S. labour market showed strong job growth and a higher participation rate, with the nation adding 313,000 new jobs in February. But the 12-month increase in pay slipped to 2.6% from a revised 2.8% in January.

The jobs numbers initially sent gold lower, but also the wage growth data was not too robust at 2.6% and this has allowed traders to buy the dip and/or keep their long positions heading into the weekend.

Markets had braced for a stronger wages reading after an inflation scare within this report a month earlier helped sink stocks. Rising inflation could add pressure on the Fed to speed up its rate rises, which could strangle the stock market. Gold, in turn, although impacted negatively by higher interest rates, could attract hedging demand against too-hot inflation.

Overall, however, the jobs report kept the Federal Reserve on track with interest-rate hikes this year.
The U.S. dollar had tumbled to 16-month lows against the safe-haven yen late last week as fears of a trade war rattled markets after Trump announced his plan for imposing tariffs on imported steel and aluminium.  This being said, the markets seem to be bearish for gold at the present moment
   
One could make the argument that if nothing changed in the world, but simply the free market was able to determine the gold price, that it would be well north of $1900 per ounce. Now factor in what is going on in the world, just how fragile the dollar-based economic system is at this point, and the likelihood of more quantitative easing, and owning gold makes more sense than ever.

Tug of War for Gold

Till date, 2018 has been quite an interesting year for global financial markets. While the year started with the untying of the crypt currencies market, with the main assets falling by more than 50% and creating a huge wave of uncertainty across all asset class.

Following that, global financial markets started to fall, proving that the markets could drop even further

And when that was not enough, Trump flustered the financial markets by talking about tariffs to the Steel and Aluminium imports in a bid to protect local companies.

The Trump administration said that the tariffs would protect U.S. industry, but the dollar and Wall Street shares slumped as the plan sparked fears of a trade war and worries about its potentially negative impact on the world's largest economy.
 
This will definitely open doors to a new trade war across the globe. As past events have shown, trade wars are never beneficial to any country.

An announcement by President Donald Trump regarding intentions to levy steep tariffs on imported steel and aluminium sparked a substantial sell-off in broader equity markets with traders finding relief in perceived safety of Gold.

The move fuels concerns that retaliation from competing countries could instigate a global trade war.

Meanwhile, Federal Reserve Chairman Jerome Powell said on Thursday there was no evidence the U.S. economy is overheating, and labour markets may still have room to improve as the central bank sticks with a gradual pace of rate hikes.           

These consecutive evens have lead to a rise in the demand for the safe haven asset, thus pushing its prices high . Gold finally broke out of its Asian/early European session consolidation phase and spiked to fresh session tops in the last hour of the trading session on Friday.

A fresh wave of US Dollar selling interest, triggered by the US President Donald Trump's tweet on trade war, provided some lift to dollar-denominated commodities - like gold.

Adding to this, global risk aversion trade, as depicted by a sea of red across European equity markets, was further seen underpinning demand for traditional safe-haven assets and remained supportive of the precious metal's uptick.

Further, a goodish pickup in the US Treasury bond yields, amid growing speculations about faster Fed monetary policy tightening cycle, continued capping any strong gains for the non-yielding yellow metal.

This year, gold has traded within a narrow range. It has had a high of $1,365 and a low of $1300.  At the current price of $1307, gold has had a 50% retrenchment from its peak price of $1365. Ultimately, a combination of global risks and increased inflation may push the price higher.

After a busy week of economic data and hawkish commentary from Powell, there were only two reports on Friday. Revised University of Michigan Consumer Sentiment came in at 99.7, beating the 99.4 estimate, but coming in under the previous 99.9. Revised University of Michigan Inflation Expectations came in unchanged at 2.7%.

The focus now shifts to key central bank rate decisions next week from the RBA, BoC, BoJ and ECB with the release of the February U.S. Non-Farm Payroll figures (NFP) highlighting the economic docket.

 For gold, the importance will remain on the wage growth numbers coming Friday as the inflation outlook remains central focus for the Federal Reserve. As it stands, market participants are factoring three rate hikes this year, (starting with this month) and if the inflation picture improve expectations for higher rates may weigh on demand for gold which does not pay a dividend.

It is this pull and push war between interest rate expectations and the perceived threat of inflation / geological risk that has fueled four swings of more than 4% on either side over the past two months.
 The precious metals market would continue looking out for interest rates along with the dollar's movement. A stronger dollar and higher interest rates reduce demand for non-interest bearing gold as the metal becomes more expensive for holders of other currencies.
 
It would now be interesting to see if bulls are able to maintain their upper hand or the uptick is being sold into amid absent market moving economic releases from the US.
   

Gold being bought on dips

Last week saw gold record its sharpest weekly gain in more than a year, as it fed off the dollar’s slump. As the week began, gold fell modestly on Monday in electronic trade, though in thinner action, as many traders took the day off for the Presidents Day holiday.

Gold prices were hit on Tuesday, with the commodity booking its sharpest daily decline in more than a year, against a backdrop of a strengthening dollar and stabilizing equities.

Gold seemed struggling to gain any grip and remained within striking distance of one-week lows. A strong follow-through US Dollar buying interest, further supported by a positive tone surrounding the US Treasury bond yields, continued to dampen demand for dollar-denominated commodities - like gold.

The precious metal dropped to an intraday low level of $1325 but further losses remained limited in wake of reviving safe-haven demand on the back of a sharp turnaround in European equity markets.

Precious metals lost ground as the dollar sprung higher following last week’s sharp decline, which has mostly extended a protracted downtrend for the commodity-pegged currency. A weaker dollar can boost commodities priced in dollars, because it makes them cheaper to buy for holders of other currencies.

Another turn-around in the dollar has weighed on gold, especially as it happened when gold prices were once again challenging recent highs.

The rebound, however, lacked any strong certainty amid expectations for a faster Fed monetary policy tightening cycle. Hence, the key focus would remain on the highly anticipated FOMC meeting minutes, which would help determine the next leg of a directional move for the non-yielding yellow metal.

Even though gold lost its lustre, market players saw this dip as a good buying opportunity. Exchange-traded funds increased holdings of gold and silver this week, reports Commerzbank.  Investors appear to be viewing the price slide as a buying prospect, as gold ETFs saw inflows of 2.7 tonnes

Where is Gold Heading To

AN upbeat U.S data and a strong dollar played key roles to pull down gold prices during the week. A lot was expected to happen over the number of data releases-

US employment report, ahead of that there is
• Data on Spanish unemployment,
• UK construction PMI
• EU PPI
• Italian CPI
• US data on factory orders
• University of Michigan consumer sentiment
• Inflation expectation.

Of these, markets remained focussed on U.S nonfarm payrolls data and gold seemed to be behaving reacting to this influential factor

An expectation of strong economic number coming in from US strengthened the dollar. Spot gold was down 0.3 percent at $1,345.22 an ounce as the dollar ticked up against the euro ahead of hotly anticipated U.S. non-farm payrolls data, which would further give fresh clues on the outlook for U.S. interest rates.

Stronger than expected numbers could shore up expectations for the Federal Reserve to press ahead with interest rates hikes this year thus increasing the opportunity cost of holding non-yielding bullion

The dollar rose 0.2 percent against the single currency in early trade, though it remained on track for a seventh straight weekly loss. Its early signs of strength pressured gold, which is priced in the U.S. unit. Once data was out, gold didn’t show that great reverse effect as expected.

 Gold ended the week little changed, after rising in six out of the last seven weeks and hitting its highest in 17 months last week at $1,366.07.

 Data released was as follows -   

• Nonfarm payrolls and unemployment rate- non-farm payrolls grew by 200,000 in January and the unemployment rate was 4.1 percent, while wages saw their biggest jump since the end of the Great Recession, the Bureau of Labour Statistics said in a closely watched report Friday.

• Hourly Earnings- More importantly, average hourly earnings increased 2.9 percent on an annualized basis, the best gain since the early days of the recovery in 2009. In addition to the solid payroll growth, average hourly earnings were up 0.3 percent for the month, matching estimates and reflecting an annualized gain of 2.9 percent. That was the best since mid-2009 as the two-year economic slump was coming to a close. However, the average work week fell two-tenths to 34.3 hours.

Within the jobs report, Wall Street and policymakers are watching wage numbers closely. While job gains have been solid and consistent, salary growth has been elusive. This report could change the narrative and might push the Fed to get more aggressive with interest rate hikes.

The Fed held interest rates unchanged after its latest policy meeting this week but raised its inflation outlook and flagged "further gradual" rate increases.           
 
During the December meeting, the Federal Reserve said that it expects that economic conditions “warrant gradual increases,” in the federal funds rate, and added that inflation declined in 2017 and was running below 2%.

Should the Federal Reserve reaffirm expectations for three rates hikes, bond yields could surge.
Some market participants warned, however, that the yellow metal may face a period of weakness as physical gold demand is expected to decline as seasonality is starting to fade ahead of the Chinese New Year.

With many other asset classes already at record price levels, there is a risk of corrections either while geopolitical developments unfold or as inflation and interest rates rise to the extent that investors take profits. Investors may well see gold as offering a relatively cheap safe haven while corrections unfold in other markets

Now gold has already broken above its 2017 high of $1357, as we had expected, before retreating over the past few days. It has now taken out some short-term support levels in the process, but the key support levels such as $1335 and $1325 are still intact, so the long-term technical bullish outlook remains in place for the time being. If we are going to see new highs for the year in the coming days, then gold will have to break back above those short-term broken levels, which are now acting as resistance. Among these, $1344/45 is an interesting level to watch today. If there’s acceptance above it then don’t be surprised to see gold go back above $1357 – the 2017 high – soon. And if gold were to get back to these levels then it would increase the probability of it reaching for liquidity that is resting above the 2016 high of $1375 next. On the flip side, if $1335 gives way first, then one will have to consider the bearish argument, more so if it also goes below $1325.

Gold - A Store of Value

Though gold headed for its first weekly drop in six week, it remained in the positive territory - thanks to U.S uncertainties, Bitcoin crisis, ECB hawkish comments to name a few.

Spot gold has declined 0.5 per cent so far this week, its worst week since early December.

Spot gold was up 0.4 per cent at $1,332 an ounce by 0659 GMT. On Thursday, it touched its weakest level since Jan. 12 at $1,323.70, having fallen from recent four-month highs.

Amid worries of a possible US government shutdown, the dollar weakened and gold strengthened with prices rising higher on Friday. Legislation to stave off an imminent federal government shutdown encountered obstacles in the US Senate late on Thursday, despite the passage of a month-long funding bill by the House of Representatives hours earlier.

Legislation to avoid a US government shutdown at midnight on Friday advanced in Congress, as the House of Representatives on Thursday night approved an extension of federal funds until February 16, although the bill faced uncertain prospects in the Senate.

The dollar has fallen since 2017 largely on expectations central banks besides the Federal Reserve are seeking to end their policy of ultra low, even negative, rates that they adopted to combat the 2008 global financial crisis and the recession that followed.

Furthermore, reacting to ECB’s hawkish language, gold prices rose during Asian morning trading hours. The yellow metal gained momentum as ECB’s December meeting minutes and soft US data weighed on the dollar.

ECB’s December minute were claimed to be hawkish due to a discussion of a gradual shift in guidance from early 2018 - much earlier than had previously discussed.

A disappointing US data lowered the dollar. The dollar index was down by 0.5% at 91.81 as of 11:57 am Shanghais time.

The December Producer price index fell 0.1% against an expected increase of 0.2%
Unemployment claims rose to 261,000 this week. Marking the fourth consecutive weekly increase and a more-than-three- month high.
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As mentioned above, another reason that has favored the rise on gold prices is the much hyped Bitcoin. Is it a bubble or a boom? Bitcoin, the world’s most popular crypt currency, has seen a major correction, losing over 40 percent of its value in less than a month, prompting investors to dump the crypt currency in exchange for the precious metal.

As of this writing, the cryptocurrency, which skyrocketed from below $1,000 in early 2016 to the historic milestone of $20,000 in December 2017, was hovering around $11,600 per a coin, according to CoinDesk. On Wednesday, the price of Bitcoin dropped to $9,400 at one point.

Currently Bitcoin look quite uncertain. It was easy to get into it but now investors are finding it difficult to come out. AS we see that currently with Bitcoin and dollar facing a decline in vale, gold on the other hand ahs rallied 7.5% in the past month and also carries with itself a history of being a safe haven asset and a store of value.

2018 kicks off a good start for gold

Recent weeks have shown strong rallies for precious metals and its looks like ass id prices are now consolidating. There may be a pull back in prices over a strengthening U.S dollar, but the rebounds since mid-December show that the sentiments for precious metals, especially gold, has turned more bullish. Once again the yellow metal has found place in an investor’s kitty and these commodities are back in vogue again.

Last week we saw gold prices rising during Asian trading hours on Thursday, 11th Jan after the dollar continued to drift lower following news that Chinese officials have recommend the country slow or halt its purchase of US bonds.

The yellow metal benefited for reasons more than one over the past week and its effect continued to spread in the current week too.

• The important data that weighed on the dollar and other global news that benefited the yellow metal-
• The December produce price index fell 0.1% against an expected increase of 0;2%
• Unemployment claims rose to 261,000 in the past week marking the 4th consecutive weekly increase and a more than three month high.
• The dollar remained soft after important news was released from China regarding US bind purchase on Thursday. This kept the dollar on the defensive which ultimately benefited the yellow metal.
• Hawkish language contained in the ECD December meeting minutes pushed gold prices further on Friday
• What added to the rally was a soft US data that released on Friday. This weighed on the dollar and pushed gold prices higher.
• A disappointing US data further raised negative sentiment for the dollar. The weak dollar amidst increased demand for equity market hedge has made the environment even more glitter for the shining metal.
• Adding a touch of bullishness to gold was data from the U.S. Commodity Futures Trading Commission on Friday, which showed hedge funds and money managers raised their net long positions in COMEX gold and silver in the week to Jan. 9.
• U.S. President Donald Trump on Friday delivered an ultimatum to European signatories of the deal to fix the “terrible flaws” in the agreement with Iran, or the United States would pull out.
• Iran’s president said on Sunday the United States had failed to undermine a nuclear deal between Tehran and major powers, and hailed the accord as a “long-lasting victory” for Iran, state television reported

A weaker U.S. currency makes dollar-denominated assets such as gold cheaper for holders of other currencies, while higher rates could dent demand for non-interest-paying gold.

The global spill over effect was seen in the domestic markets too. In the national capital, gold of 99.9% and 99.5% purity advanced by Rs100 each to Rs30,750 and Rs30,600 per 10 grams, respectively — levels last seen on 18 November.
 Apart from positive global cues, buoyed by a slump in the dollar, sustained buying by local jewellers at the domestic spot market kept gold prices elevated

Summing it up, gold has moved up sharply in dollar terms in the past few days despite mixed economic data out of the USA. So gold investors should treat the latest rise in the gold price purely as a wealth protection exercise.  That is what gold is good at over time.  If the dollar declines further then gold will rise further, as will all the major precious metals – and most other commodities too.

Glitter metal gives Bright performance

2018 has definitely given gold the good launch platform. This year, gold began with its highest opening price for a calendar year. This opening has been its highest in the past 5 years after rising by around 13 per cent last year.

Last year, gold managed to close above $1300 an ounce and has been seen hovering on the range. In the currency year too gold reached its highest level since it opened on Jan 1st.

This marks only the fourth time ever that gold has opened the year above $1,300 an ounce.
The main reason for this bright performance of the glittering metal can be accrued to a weak US dollar which fell by 10% last year against a basket of major traded currencies – the worst yearly performance since 2003.

In large part, the performance of gold, and indeed the performance of many dollar-denominated asset prices have been justified by the dollars weak performance.

The US dollar weakened across the board after the release of the US employment report and pushed gold to the upside. The metal rose $6 in a few seconds, from $1316/oz to $1323 to test daily highs. It failed to break higher but it was holding near that area and also close to Thursdays high of $1326.

Before the report realised gold was trading in a negative territory, pulling back from the monthly high that it had attained. But once the U.S. data was released gold rebounded as it found support at $1315.

According to the Labour Department,
• The US economy added 148K jobs in December, below the 190K estimated by market analysts.
• Average earnings rose 0.3% (as expected)
• While the unemployment rate remained at 4.1% (17-year low).


A few minutes after the report the greenback recovered most of its losses. Despite being below expectoration the data continue to signal a strong labour market and it did not alter significantly Fed rate hike expectations.

As we have already discussed this before that Gold started out 2018 strongly, drawing support from a soft U.S. dollar. But the demand for the yellow metal in the Asian markets hasn’t picked up well. 

Spot metal hit a high of $1,321.45 an ounce overnight, its strongest level since mid-September, before easing back slightly.

Signs of seasonal Asian buying are yet to be seen in any meaningful way, which does make it difficult to chase this move higher, although we do expect this to begin filtering in over the next week or so.

We all know that gold has always proved to be a safe haven asset in times of uncertainties and has also been one the highest return generating asset in its class. And the same is expected to continue, keeping in mind gold's past years performance and current year’s opening.

Gold - Past performance future prediction

As the year comes to a close, let’s take a look back at the main gold trends this year, from the impact of US Federal Reserve interest rate hikes to widespread geopolitical uncertainty, how it performed and how the outlook is in 2018.

Though gold made double digit gains in some currencies, it did have a tough year. The precious metal has had some harsh criticism from the mainstream media and unfair comparisons to lubricious assets, such as bitcoin and US equities.

Few have acknowledged gold's impressive performance in the face of rising interest rates, tightening monetary policies and the ongoing equity bull market.

When we see gold’s performance over the past 12 months, I think it would be better to divide it over 4 quarters to get an enhanced understanding of gold, its performance and the reason behind its volatility.

Quarter 1- The main driving force for gold prices in this quarter was Trumps uncertainty.
Concerns about US President Donald Trump and anticipated rate hikes from the Fed caused worries, as did the Brexit process and European elections. All of those factors combined in the first three months of the year to drive the yellow metal’s price
During the first quarter, gold traded between $1,184.62 and $1,257.64.
The gold price made its eighth Q1 gain in 10 years in the first quarter of 2017, buoyed by safe-haven demand from anxious investors.
Early in 2017, GFMS noted a gradual rise in gold demand complimeeyed by a reduction in global mine output, resulting in smaller surplus in 2017. This supply demand gap further reflected a bright year for gold and gold stocks in particular in the first quarter.

Quarter 2- Herein steps the Fed, whose hawkish tone influences the market and gold prices in particular.
The gold price stalled in the second quarter of the year as concerns about geopolitical tension faded away. The Fed increased interest rates for the second time of the year in June — that hurt the yellow metal as gold is highly sensitive to rising rates.
Demand for gold dropped 14 percent year-on-year in the first half of 2017 due to a sharp fall in ETF inflows, according to the World Gold Council (WGC). Total global demand for gold reached 2,003.8 tonnes from January to June, down from 2,318.7 tonnes in the same period the year before.
The yellow metal traded between $1,218.80 and $1,293.60 during the quarter.

Quarter 3- a Series of uncertain events leading to geopolitical crisis once again put gold on the top list of safe haven assets.
The gold price gained more than 3 percent in the third quarter, even though September was one of its worst months of the year.
A weaker US dollar and geopolitical tensions between the US and North Korea supported gold over the quarter. Gains were offset by the Fed’s hawkish tone, which pointed to another interest rate hike later in the year and three more in 2018.
At the end of the quarter, most analysts agreed that worldwide political developments, as well as the US dollar, were set to be key drivers for the gold price for the rest of the year.
Gold traded between $1,212.20 and $1,348.60 during the quarter.

Quarter 4- The most awaited Fed meeting becomes the focus globally. 
The gold price remained almost neutral in the last quarter of the year, and was on track for a quarterly loss of less than 1 percent. Trump’s new Fed chair nomination and the expectation of another rate hike in December were some of the key factors driving prices during the period.
The yellow metal has been trading between $1,285.50 and $1,298 during the quarter.
So as we saw that in spite of witnessing volatilities, 2017 was a tough yet good year for gold.
Now what we need to pay heed to is that whether the above mentioned factors will continue to influence gold in 2018 or do we have many more surprise for the yellow metal in the following year-

The gold price is likely next year to continue the rise it commenced two years ago. The main contributory factors here remain the extremely

Loose monetary policy pursued by nearly all key central banks, resulting in ongoing very low to negative interest rates.

Political uncertainty is also likely to be a constant feature throughout the year. One example worth mentioning is the difficult process of forming a government in Germany, the outcome of which remains unclear. Parliamentary elections will probably be held in Italy in the spring of 2018 and could spark renewed unrest in the Euro zone

Brexit is likely to become an increasingly hot topic during the course of the year if agreement is still not reached in the negotiations between the EU and the UK and the UK’s disorderly exit from the EU becomes more likely in the spring of 2019.

 That the second year of Donald Trump’s presidency in the US will run any more smoothly in terms of domestic or foreign policy than the first one did.

The implementation of the tax reform and the possible implications for monetary policy are likely to keep the market just as much on tenterhooks as the ongoing investigations into contacts between Trump’s election campaign team and Russia.

A prediction of the future approach of the Fed towards the monetary policy gets difficult as, Trump will next year make several new appointments to the Fed’s Board of Governors.

What is more, midterm elections to the US Congress will be taking place in the autumn of 2018, which is likely to increase pressure on Trump and the Republicans to implement the tax reform. Otherwise there is a risk of the high-flying US stock markets correcting, which would benefit gold

The numerous geopolitical crises should likewise generate latent uncertainty. These include in particular the North Korea conflict, the growing tensions in the Middle East between Saudi Arabia and Iran, and the conflict between the West and Russia over Russian influence in the US elections and in Eastern Ukraine.

Admittedly, the Fed has already raised interest rates twice this year, and is likely to do so for a third time in mid-December. Our economists expect three further rate hikes next year. However, this does not necessarily preclude a rising gold price, as 2017 has shown. This is because other central banks apart from the Fed – such as the Bank of England and the Bank of Canada – have also increased interest rates in the meantime, which reduces the benefits of the rate hikes for the US dollar.

 Physical gold demand should generate somewhat more tailwind next year. It was fairly subdued in 2017. The World Gold Council (WGC) expects gold demand in India ultimately to reach a mere 650-750 tons after a strong first half of the year, putting it at a similarly low level as last year. Demand fell away when a goods and services tax was levied on gold purchases with effect from 1 July.

Gold ETFs On balance, ETF investors have hardly bought any gold at all since the end of September. By contrast, the world’s largest gold ETF – the SPDR Gold Trust that is listed in the US – recorded only minor net inflows. The numerous uncertainties and low real interest rates suggest that we will also see net inflows into gold ETFs in 2018. How pronounced these turn out to be will depend to a large extent on whether stock markets continue to fly high or whether they correct.

Numerous political uncertainty factors in Europe and the US, as well as a number of potential sources of geopolitical crisis, are likely to boost demand for gold additionally. Gold demand in Asia should have bottomed out and increase moderately in 2018. The gold price is likely to rise during the course of the year and to be trading at $1,350 per troy ounce by the end of 2018.

One risk factor for gold is the US tax reform. If this is fully implemented, the rally on the stock markets could continue, meaning that gold is in less demand accordingly.

So as we always say, gold is expected to have its share of highs and lows in 2018 and of the influencers discussed above, which happens first and how severely it happens will decide the fate of the yellow metal.

Fed Hike fails to cap gold

Spot gold headed for the biggest gain in three weeks after Federal Reserve officials stuck with a projection for three interest-rate increases in the coming year, easing concerns that speeding up economic growth would spur an even faster pace of monetary tightening.

Gold prices rose on Wednesday, extending gains to 1 per cent as the dollar fell after the US Federal Reserve raised interest rates as expected but left its outlook unchanged for coming years.
The spot gold price rallied to US$1,256.87 after the Fed raised its benchmark interest rates by 25 basis points, or a quarter of a percentage point.

Gold prices on Friday held onto gains made after this week’s interest rate rise by the U.S. Federal Reserve and were set for their first weekly rise in four weeks.

The U.S. Federal Reserve decided to increase the U.S. interest rate by 25 basis point on its latest Federal Open Market Committee (FOMC) meeting held on 12th and 13th December.

By a 7-2 vote, the Fed on Wednesday raised the benchmark lending rate by a quarter percentage point, its third hike this year. In a statement following a two-day meeting, the Federal Open Market Committee omitted prior language saying it expected the labor market would strengthen further.

This move was highly anticipated by the market and hence was being priced against gold well ahead of the meeting. However, despite the action being against the attractiveness of gold as an investment, gold prices  closed on a higher note on December 13th.

Generally, a rate hike pulls down gold prices. But contradictory situation was witnessed on Wednesday, where gold prices remained high even after a rate hike.

 “Gold moved up in its initial reaction because Fed is dovish in terms of a rate hike vision for 2018, and it sees only three rate hikes, not four.

This vision weakened the US dollar which gave the required push to gold prices.

The U.S Dollar Index (DXY) measures the value of the dollar against a basket of six major foreign currencies. The index fell roughly by .6% during the Fed's announcement on the 13th, which was otherwise gaining momentum ahead of the meeting. Although, an interest rate hike should have ideally strengthened the position of the dollar, the Fed's decision negatively impacted the currency as the meeting kept its projection for interest rate hikes for 2018 unchanged.

 This was despite the fact that the Fed sees a consistent recovery in the U.S. economy in the upcoming year. The Fed expects 3 additional rate increases in 2018 and another 2 in 2019, in line with its September projections. However, GDP growth expectation was increased by .4% higher than its previous estimate of 2.1%, mainly due to the impact of the implementation of the U.S. tax reform
GOLD BARS rose above 1-week highs against most major currencies in London trade Friday, extending their recovery from this week's multi-month lows as world stock markets slipped for a second day from new all-time highs.

The dollar was on the defensive on Friday after wrangling over a bill to change the US tax code dented confidence, while the euro sagged after the European Central Bank signaled it would maintain stimulus for as long as needed

As the Fed and ECB reverse sharply from their unprecedented easing of recent years to unprecedented tightening in the coming years, these record-high, euphoric, bubble-valued stock markets are in serious trouble.  As they roll over and sell off, investors will rush to prudently diversify their stock-heavy portfolios with counter-moving gold.  There’s nothing more bullish for gold investment demand than weakening stocks.

So contrary to recent weeks’ and months’ erroneous view that Fed rate hikes are bearish for gold, history proves just the opposite is true.  Gold has thrived in the 11 modern Fed-rate-hike cycles before todays, and it has powered higher on balance in this 12th one.  While you wouldn’t know it after this past year’s extreme Trumphoria rally, Fed rate hikes are actually bearish for stocks and thus quite bullish for gold.

Gold feels the winter chills

Temperatures dropped and so did gold prices at the start of the week.  Gold weakened over a firm dollar on Monday

Spot gold was almost unchanged on Monday morning as a firm dollar stood steady with expectations of higher US interest rates and healthy data from the US.

Gold steadied near its weakest level in almost five months on Wednesday amid expectations the Federal Reserve would raise interest rates again at the conclusion of its last policy meeting this year.
The Fed has increased rates twice in 2017 and is still expected to push through three more hikes next year.
           
 Spot gold was down 0.1 percent at $1,242.18 an ounce during Wednesdays early trading hours. That was not far above Tuesday's low of $1,235.92, which was gold's lowest level since July 20.   
   
However later in the day, gold started gaining momentum and  settled higher, recovering part of the losses suffered over the last four sessions that sent prices to a nearly six-month low.

Further as the dollar continued to weaken, gold prices climbed higher in the wake of the U.S. Federal Reserve’s decision to raise interest rates, as expected, for the third time in 2017.

The central bank lifted a key short-term U.S. interest rate to a range of 1.25% to 1.5% and stuck to its earlier forecast for just three rate hikes in 2018.

Gold reacted positively to this and the year-end rate hikes served as key instruments to bring about big rallies in gold.

The Fed’s plans for rate normalization have been side-tracked by economic reality in the New Year. However, also judging from the past two years, it could take a couple of days or a couple of weeks for gold to begin rebounding more strongly.

Will 2017 end on a negative note for gold

It was a soft week for gold as we saw prices declining over a strengthening U.S Dollar.
The U.S dollar recovered at the start of the week after the US Senate passed its tax reform bill. This created pressure on gold and hence the yellow metals price declined during Asian trading hours on Monday, 4th December.

The dollar strengthened over tax reform bill passed on Sunday, 3rd December. With both bills calling for a reduction in the corporate tax rate to 20%, US tax reform progress is expected to help sustain growth in corporate capital investment.

The upside for the yellow metal was capped after the dollar rose and equities markets rejoiced in response to the US Senate passing the bill. A House- Senate conference committee will now work to resolve the differences between the House and Senate tax bills

Moreover, markets now gear up for the next Fed meeting due to be held this week from 12- 13 December. Now with the market expecting an interest rate rise, the weakness we are seeing is a pre effect of this expectation.

This negative sentiment for gold continued throughout the week, as we saw gold prices dropping over Thursday.

Gold surrendered majority of the early modest recovery gains and was placed at the lower end of its daily trading range, around the $1245 region.

However, the precious metal edged up during the Asian session on Friday as investors resorted to bargain hunting, especially after the overnight slump to its lowest level in more than four months. The initial uptick, however, turned out to be short-lived and was being capped by a strong follow-through US Dollar, which tends to dent demand for dollar-denominated commodities - like gold.

Meanwhile, a goodish pickup in the US Treasury bond yields was also seen driving flows away from the non-yielding yellow metal. Moreover, the prevalent risk-on mood, as depicted by strong gains across global equity markets, further dented the precious metal's safe-haven appeal and collaborated to the slide over the past hour or so.

Currently the scenario is such that entire focus is on the fact that is pulling down gold prices.

• Rising equity markets,
• A rising dollar on the back of a likely tax deal out of Congress before yearend,
• The certainty of more Fed rate hikes
• The next Fed meet on December 13 - and
• Other attractive speculative alternatives including art, real estate, bitcoin, etc

Are all putting a dent in the short term investment prospects for the yellow metal as investors look for better returns elsewhere. 

However we can’t just ignore the currently subtle uncertainties out there which could turn the scenario around for gold – notably
• Mueller’s investigation, a geopolitical crisis per se North Korea
• Trump Administration internal problems 
• A further possible Middle East conflagration
• An escalation in the Trump/Iran rhetoric (which some suggest could lead to military action), the much predicted crash in equities markets and
• A possible bursting of the bitcoin bubble
Even though all of the above mentioned points don’t seem to erupt in the near future, it may extent to 2018, but still they can’t be ignored as they will be playing a significant role in the gold price movement in the long run.

Negative atmosphere for gold

Gold prices fell to one week lows on Friday as the dollar gained ground after upbeat U.S. factory orders and service sector data offset the impact of a weaker than expected employment report for October.

• The dollarturned positive after the following data release-
• U.S. factory orders
• ISM non-manufacturing PMI data.
• Another report showed that new orders for U.S. made goods rose for the second straight month in September
• Orders for core capital goods rose more than expected.

The reports raised the probability of the FederalReserve's rate hike at a faster pace in the coming months. Higher rates tend to make the dollar more attractive to yield seeking investors.The dollar had earlier fallen to its lows on Friday after the release of October U.S. nonfarm payrolls, which came in below expectations.

On Monday, the Federal Reserve Bank of New York confirmed that William Dudley, among the most influential monetary policymakers throughout the financial crisis and its aftermath, expects to retire by mid-2018.

That raised another question over leadership at the central bank, less than a week after Trump chose a new Fed chief.

There are a lot of uncertainties over the Federal Reserve which makes it difficult for the markets to trade and hence most of the focus shifts to the tax reforms.

The dollar slipped to a more than one-week low against the yen on Wednesday, pressured by worries over possible delays to President Donald Trump's tax reform plans.

U.S. House of Representatives Speaker Paul Ryan on Wednesday left the door open to a possible delay in implementing a huge corporate tax cut, following a Washington Post report that his fellow Republicans in the Senate are exploring the option.

Any potential delay in the implementation of tax cuts, or the possibility of proposed reforms being watered down, would tend to work against the U.S. currency, analysts said.

Some investors believe the data was distorted by the effects of recent hurricanes in the U.S. Investors were also focused on the proposed tax overhaul outlined by Republican lawmakers on Thursday.
Gold was higher on Thursday as a weaker dollar pushed prices during the session to a three-week high for the second time in successive days.

Gold had gained momentum till Thursday but lost its shineby the end of the week over a strengthening US dollar.

Gold prices closed lower after early weekly strength failed to gain enough upside momentum to continue the move. Bullish traders didn’t seem to be surprised by the release of the Republican version of U.S. tax reform, the Fed dropping hints of a December rate hike in its November monetary policy statement and President Donald Trump’s nomination of Federal Reserve Governor Jerome Powell to be the next Fed chair.

The market traded high for most of the week, but collapsed on Friday after the U.S. Dollar rose in reaction to the October U.S. Non-Farm Payrolls report.

Supporting the market were concerns over political and geopolitical events. Resistance was being fuelled by rising Treasury yields, a firmer U.S. Dollar and strong appetite for higher- risk assets.

Some traders believe tax reforms could bolster growth which would lead to a stronger growing U.S economy , further creating pressure on the Federal Reserve to raise interest rates and this pushing gold prices down.

Though gold still drew short-term support from uncertainty over the U.S. tax bill, “the overall trend has shifted into a neutral to negative trend.

It’s the current geo political and financialuncertaintythat’s creating a negative atmosphere for gold as the year comes to an end. We hope December gets in some great surprises for gold.

Gold tracks the U.S Currency

Bullion moved up on Wednesday as geopolitical tensions between US& North Korea and in the Middle East prompted investors to flock to safer assets. Gold was positive by almost half a percent and tested high in the international markets.

Gold prices edged higher on Thursday, after marking a near three-week high in the previous session, as the dollar eased.

Spot gold rose 0.2 percent at $1,283.91 per ounce at 0844 GMT. On Wednesday, it rose 0.4 percent and touched it’s highest since Oct. 20 at $1,287.13 an ounce.

Initially what pushed gold prices were factors like geo political uncertainties and safe haven buying. But currently, the severity of these influential factors has subsided and hence gold has been probably tracking the US dollar as its driver for price movement.

The dollar slipped to a more than one-week low against the yen on Wednesday, pressured by worries over possible delays to President Donald Trump's tax reform plans.

Any potential delay in the implementation of tax cuts, or the possibility of proposed reforms being watered down, would tend to work against the U.S. currency.

On Monday, the Federal Reserve Bank of New York confirmed that William Dudley, among the most influential monetary policymakers throughout the financial crisis and its aftermath, expects to retire by mid-2018.

That raised another question over leadership at the central bank, less than a week after Trump chose a new Fed chief.

Currently the markets are in a fix, wondering what exactly to look for while making their trade. It’s difficult for them to trade even the Fed at the moment and hence as of now all eyes will remain focussed on the tax reforms for any further movement in the precious metals market.

Winter demand good for gold but prices likely to fall

Gold prices were hovering near multi-week highs for most investors outside the US Dollar and Euro on Thursday, as the Bank of England followed the Federal Reserve's widely expected "no change" decision by raising UK rates off an all-time record low as analysts and traders had forecast.
However in Friday, Spot gold was down 0.2 percent at $1,267.01 per Ounce and touched a one-week low of $1,265.16 over positive economic data and central bank decisions.

The past week was a significant week for central banks. The Bank of England raised interest rates for the first time in ten years, the Federal Reserve indicated that a December rate hike may happen and President Trump named Powell as his choice for leader of the Federal Reserve.

But still uncertainty prevails as there is no surety that how economies will manage when the central bank support is withdrawn. Moreover none of the financial centers have managed to meet inflation targets which they were all so vocal about.

Adding to the uncertainty is the issue that three of the world’s four most important central bank chiefs are nearing the end of their terms and may be well replaced. The rally in the gold price and fall in the dollar is just the first indication with how markets feel about such changes.

Gold held steady on Monday, but hovered near a one-week low hit in the previous session, as largely upbeat U.S. economic data reinforced the prospects of another rate hike by the Federal Reserve next month.

U.S. jobs growth accelerated in October, although wage growth was tepid, adding to the Fed’s assessment last week that “the labor market has continued to strengthen”, with the sluggish wage data doing little to change expectations.

JP Morgan Chase & Co on Friday raised its forecast on the number of U.S. interest rate increases by the Federal Reserve next year to four from three as the October payrolls data reinforced the view of a tightening domestic labor market.

Markets are increasingly confident the Fed will hike interest rates in December, which has weighed on the precious metals complex,

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

The Federal Reserve looks likely to raise interest rates, and that should bring up the value of the US dollar in general. If that’s the case, then gold could roll over a bit. Ultimately, this is a market that will continue to be just as mixed up as many others are right now, as we do not know with any type of certainty that the Federal Reserve is going to do one thing or the other.

Analysts said the yellow metal could also find support after U.S. President Donald Trump, who kicked off a 12-day Asia trip, looked to present a united front with Japan against North Korea.
Moreoverdemand for gold is likely to rise not only in the domestic market butinternationally too.
While we see the onset of the wedding season in India, normally winter is also a good time for gold globally with men buying their significant others jewellery for Christmas and lots of New Year’s Day marriage proposals

This rise in demand is expected tousher in renewed interest for bullion in coming week.