Gold has posted considerable losses for a second straight day. In Thursday’s North American session, the spot price for an ounce of gold is $1274.06, down 0.75% on the day. In the US, unemployment claims edged lower to 238 thousand, below the estimate of 241 thousand. Personal Spending dropped to 0.3%, marking a 4-month low. Still, this beat the estimate of 0.2%. On Friday, the US releases Manufacturing PMI.
There was more good news for the US economy on Wednesday. Preliminary GDP for the third quarter posted a sharp 3.3%, as expected. This was higher than the initial estimate of 3.0% and marked the fastest growth rate since Q3 of 2014. This was particularly impressive, as the southern US was battered by major hurricanes. Although consumer consumption was softened in the third quarter, business spending improved. The rosy picture of the US economy was summarized by Fed Chair Yellen on Wednesday, who said that the expansion was broad-based, across sectors of the economy.
Gold prices are inversely linked to interest rate hikes, and with the markets expecting rate hikes in December and January, traders should be prepared for some movement from gold. As well, there are major changes taking place at the Federal Reserve, as Jerome Powell is set to replace Janet Yellen as Fed chair in February. Powell didn’t make any waves at his confirmation hearing on Tuesday, although his comments on relaxing regulations for smaller banks did send global stock markets higher. Powell inherits a strong US economy, and this could mean several rate hikes in 2018, if the economy maintains its current pace. Still, inflation remains stubbornly low, and with Fed policymakers divided on whether to keep the 2 percent inflation target, the markets will be keeping close tabs on how Powell deals with inflation when he takes over the helm of the Fed.
