Economic events on gold
DURING the previous week, gold prices’ movement reflected the hawkish comment from Fed, and with the anticipation of a rate hike in March, gold was sold down by market participants before the FOMC meeting on March 15. After the announcement of a 25 basis points ( bps) increase in interest rate, gold rebounded, buoyed by a decline in the dollar.
The US dollar index, which tracks the greenback against a basket of currencies, plummeted below the 100 level on Tuesday, losing over two per cent in 2017.
Fed’s hawkish comment on the rate hike, which includes two more hikes this year and three hikes in 2018, indicated a route of regular rate hikes. The market expected the next hike to come in June and another in December.
Since the US presidential election on November 8 and the interest rate hike on March 15, the market is now observing the first round of the 2017 French presidential election, which will be held on April 23, 2017.
The market is expected to continue to trade in uncertainty, hence, gold’s prices could rise higher.
Now that Emmanuel Macron and Marine Le Pen are the two leading candidates in the election, independent centrist, Macron is seen as beating nationalist, Le Pen in the run- off vote by 61.5 per cent to 38.5 per cent. Based on the Brexit and the result of the recent US election, anything is possible at this point. Therefore, should Le Pen win, gold could be placed in as a safe haven for investments.
There are other events that could move the gold market. These events are the healthcare bill vote which was supposed to be carried through on Thursday, but it was postponed. On Friday, vote on US President Donald Trump’s healthcare bill has been withdrawn after it failed to gain enough support to pass in Congress. As this is a key priority of the Trump Administration, other parts of Trump’s agenda could be push down as well, including the tax reform and infrastructure plan. The fi nancial markets and gold price has been tracking the healthcare replacement bill’s voting process.
In short, there could be a shift in demand towards gold as many uncertainties still remain. Investors should always see gold as a good asset to reduce systematic risk in the case of uncertainty in
the global market.