Gold Prices and the Presidential Debate

Price of gold went north on September 26. The gold scheduled for delivery in December on New York Mercantile Exchange’s Comex division went up 0.04 percent to reach $1,342.25 per troy ounce. The Comex will also see December delivery for silver futures to be eased 0.11 percent to reach $19,788 per troy ounce. Copper futures destined for delivery in December went up by 0.14 percent to reach $2,203 per pound.

External influences

The coming week will see Janet Yellen, the chairperson of the Federal Reserve, going to speak in the middle of the ongoing certainty over timing of the hike in the next US rates.  Additionally, Mario Draghi, the President of the European Central Bank, will be keenly watched for fresh hints on whether the European Central Bank or ECB will push up the monetary stimulus in coming months. This will provide a fillip to inflation and also shore up the economy.  Another influence will be debate between the two US Presidential contenders. Many investors are keen to listen to the debate. Remarks by Haruhiko Kuroda, the Governor of Bank of Japan, will also be noted down. This is important as the Japanese central bank will modify the policy framework.

The central bank of Japan desisted from further slashing of the interest rates so that it does not infringe into negative territory. It also did not expand the asset purchase program at the time of monetary policy meeting. The bank instead targeted the interest rates so that the inflation target is reached.

Speech and gold

On septemebr 27, after US Presidential debate between Hillary Clinton, the Democratic nominee and Donald Trump, her Republican contender. 

Gold is sensitive to US rate movement. This lifts opportunity costs when it came to holding the non-yielding assets like bullion. An incremental journey to steeper rates is viewed as less threat to the gold prices compared to successive quick increases. The rate of interest as fixed by the Federal Reserve remained unchanged at the end of the Fed’s policy meeting on September 21. There was a hint; however, that December could witness a hike in case the job market improves as it is doing now. The Federal Reserve also slashed the rate hike frequencies it expects to do in 2017 and 2018. Policy meetings are scheduled for earlier part of November and middle of December as well. 

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