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Gold Market Spooked On Halloween

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Gold Market Spooked On Halloween

It seemed traders in the gold market were spooked by something on Tuesday aside from the Halloween holiday. Spot gold was down about $5 per ounce to $1,271/oz despite trading steady overnight.

Fresh controversy out of Washington regarding both Democrat and Republican 2016 presidential campaigns conspiring with Russian agents didn't sway the broader markets much. Greater attention is being paid to central bank policy, the bond markets, and the U.S. dollar.

Silver prices lost 0.65% (-11¢) in early trading to $16.72/oz. Platinum was flat at $916/oz and palladium surged $13 (+1.35%) to $970/oz.

After losing some ground on Monday, the dollar was back up 0.1% on the DXY index to 94.6. After approaching a two-week high against the USD during trading in Asia, the Japanese yen tumbled 0.4% to nearly ¥113.5 to the dollar. The euro continued to trickle lower to about $1.16 as the Spanish government imposed stricter control over the Catalonia region, where a separatist movement has long sought to become an independent state. A similar crackdown is happening in Iraqi Kurdistan, where an independence referendum was also recently held.

While these independence movements are having some impact on the markets, the effect has been muted. The machinations of central banks have proven far more influential as summer has given way to autumn. The Bank of England and Bank of Japan could make policy moves this week after the European Central Bank (ECB) chose to taper its quantitative easing program.

In the U.S., two changes could be coming at once for the Federal Reserve. Then again, essentially no changes is also a possible outcome of this week. Most analysts are anticipating the central bank to raise interest rates one more time by the end of the year, meaning either this week or in December. (Most bets seem to be on December.)

At the same time as the FOMC meeting, President Trump is expected to replace Janet Yellen as Fed chair this week. Jerome Powell, a current Fed governor who is closely aligned with Yellen on policy, is widely believed to be the favorite for the position, which would not be much of a departure from the current leadership—nor from the current path of "normalizing" interest-rate policy. A more hawkish pick like economist John Taylor or former Fed governor Kevin Warsh would portend a potentially very different future for Fed policy. However, Trump could always name one of these hawks as vice chair, since the Fed's current #2, Stanley Fischer, is leaving his post this month.

Interestingly, even though Janet Yellen's term as chair is expiring, she can choose to stay on the Fed board for an additional four years even if Trump doesn't nominate her to another term. The FOMC meeting concludes on Wednesday and President Trump has said he will announce his nominee for Fed chair by Thursday.

The Case-Shiller home price index from Standard & Poor's was updated for the month of August on Tuesday. The data showed that prices rose 6.1% year-on-year. This followed a year-on-year increase of 5.9% during the previous month. As a result, many eager home buyers are being priced out of the market.

Today is also the last trading day before options expire, which may lead to some added volatility on Wall St. The Dow Jones and S&P lagged behind the Nasdaq in early trading.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

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