Gold is almost unchanged in the Monday session, after strong losses on Friday. In North American trade, spot gold is trading at $1259.10, down 0.03% on the day. On the release front, there are no major events on the schedule. On Tuesday, the US releases JOLTS Jobs Openings, which is expected to edge lower to 5.66 million.
The Federal Reserve is sounding less sure about a final rate hike in 2017, and the markets remain skeptical, with the odds of a December move below 50%. Investors have now shifted their attention to the Fed’s balance sheet, which stands at $4.2 trillion. Fed policymakers have broadly hinted at reducing purchases of bonds and securities starting in September, but San Francisco Fed President John Williams was more forthcoming about the Fed’s plans, likely aimed at giving notice to the markets. In a speech on Wednesday, Williams said that the economy had "fully recovered" from the 2008 financial crisis and called on the Fed to start trimming the balance sheet "this fall". Williams added that the process would be gradual and would take four years to reduce the balance sheet to a "reasonable size". Other FOMC members have also come out in favor of the Fed starting to wind up its portfolio this fall. A reduction in the Fed portfolio would likely push gold prices lower, with the Institute of International Finance estimating that a reduction of $200 billion in the balance sheet would be equivalent to three normal interest hikes. Gold prices move inversely to rate hikes, so as the Fed trims down its portfolio, the dollar could move higher against gold.
