Market participants are now waiting for the latest Federal Open Market Committee meeting minutes to be released on Wednesday.
The gold price settled at its highest point in two weeks on Tuesday (October 10), buoyed in part by a weaker US dollar.
Gold for December delivery rose 0.7 percent to settle at $1,2931.80 per ounce after rising as high as $1,296.70 earlier in the day. According to data quoted by MarketWatch, September 26 was the last time gold futures closed at that level.
“The weaker dollar has been the main reason why buck-denominated gold has rallied [Tuesday], with the greenback still reeling from Friday’s release of [the] weaker U.S. jobs report,” Fawad Razaqzada of Forex.com told the news outlet.
The yellow metal was also supported by continued tensions between the US and North Korea. Reuters states that “[i]nvestors were particularly wary on Tuesday,” with concerns centering on a North Korean holiday celebration and hints of military action from US President Donald Trump.
The president plans to stop at the North Korea-South Korea demilitarized zone next week during a trip to Asia, and will reportedly give a “strong anti-North Korea speech” while he is there.
Tensions in Spain played a role in gold’s price rise as well. An October 1 referendum in the province of Catalonia was recently declared invalid by the Spanish government, and on Tuesday the province’s government responded by signing a declaration of independence from Spain.
Analysts have mixed ideas about where the gold price will go for the rest of 2017. Some market watchers, including Razaqzada, have suggested that the metal will need to get back above the $1,300 mark before it can gain further traction.
“[T]echnically, I am not yet convinced gold will hold on to its gains as it is still below that key $1,300 inflection point. Only a decisive break above this level would be technically bullish,” he explained.
The next catalyst for gold this week will be the release of the Federal Open Market Committee’s latest meeting minutes on Wednesday (October 11). Many market participants expect them to indicate that the Fed will raise interest rates again in December, a move that could keep the gold price down.
However, some are optimistic about gold’s prospects, even in the face of a rate hike. In note published Tuesday, Macquarie said it sees the metal reaching $1,400 by 2018, spurred upward by “a faltering U.S. economy and weaker U.S. dollar.”
The Australia-based bank explained that while short-term risks for gold still exist, it sees interest rates weighing less heavily on the metal moving forward.
“Yes, the Fed will have to raise rates — growth remains higher than trend — but this is becoming true elsewhere. Crucially we think the dollar is more likely to weaken than strengthen with pre-2014 levels are perfectly achievable,” commented Macquarie, adding, “[w]e remain skeptical the U.S. Administration can restore U.S. economic outperformance, implying the trend for the dollar is still downwards.”
Bank of America Merrill Lynch analysts have also suggested that the gold price could reach $1,400 by early 2018. Click here to learn more about what may be in store for the gold price in Q4.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.