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.