Tuesday has been a volatile session for gold futures, at first the metal fell after reaching a five-week apex as investors took the opportunity to profit-take, but they quickly returned to the market this time driving the metal to a six-week high amid renewed demand for safe haven investments. Then, at last check gold had returned to the downside, dropping 0.12% to trade at $1,183 per ounce.
Gold’s initial drive higher came as the US dollar retreated. This retreat followed some uncertainty ahead of President-elect Donald Trump’s press conference on Wednesday. Wednesday will mark Trump’s first official news conference since July and market participants are looking for clarity when it comes to the spending plans from the incoming Trump administration.
Gold slumped since Trump was elected, as his campaign promise to further boost the US economy reduced investors’ desire for safe haven investments. This of course, coincided with the US Federal Reserve’s rate hike. Combined, these developments sent gold prices lower at the end of 2016. However, gold finished 2016 with a gain thanks to the metal’s rally earlier in the year.
Even though future rate hikes, and the Trump administration’s potential fiscal stimulus programs are negative for gold, analysts say that they have already largely been baked into the price of gold; therefore, fresh drivers are needed to drive the metal in either direction. Right now, the metal is reacting to some market uncertainty as well as fluctuations in the value of the US dollar.
The Federal Reserve is looking at three rate hikes in 2017, with the US economy on solid footing an inflation starting to tick higher. On Monday, Boston Fed President Eric Rosengren said that economic conditions are likely to warrant “a still gradual but somewhat more regular” increase in rates, while Atlanta Fed President Dennis Lockhart said that the economy “appears solid” but is likely to grow at a moderate pace. Fed Chair Janet Yellen will be participating in a town hall style meeting on Thursday. Investors will also look to her comments to predict when the next rate hike will occur.