Gold has posted slight losses in the Wednesday session. In North American trade, the spot price for an ounce of gold is $1336.32, down 0.18% on the day. On the release front, manufacturing numbers looked sharp. Capacity Utilization improved to 77.9%, beating the estimate of 77.3%. This marked the highest level since July 2014.On Thursday, there are a host of key indicators out of the US, led by Building Permits and unemployment claims.
The Federal Reserve hasn’t been in the headlines since New Years’, but the lull won’t last much longer. The Fed will hold its next policy meeting on January 31. A rate hike is a virtual certainty, with CME Fed Watch pegging the odds of a quarter-point hike at 98.5%. Although this means that a rate hike has been priced in by the markets, the dollar could nevertheless gain ground after a hike, as a rate increase would signify an important vote of confidence in the economy by the Fed Reserve. If the US economy continues to expand at a clip of around 3 percent, there is a strong likelihood of another rate hike in the first half of 2018.
Gold often gains ground when investor risk appetite is weak, but that has not been the case early in 2018. Global stock markets are pointing higher and US economic numbers have been strong. This points to recent weakness in the US dollar as the catalyst for stronger gold prices. If major currencies such as the euro and Japanese yen continue to make inroads against the dollar, traders can expect the gold rally to continue.
