Current Gold Rally Could Continue

What would the Fed say? Well according to the CME’s FedWatch tool, the odds of another quarter-point U.S. rate increase have decreased to around 47%, a drop of 3% when compared with the odds of a month ago. Tepid economic data released today has further eroded the probability of another rate hike being initiated by the Federal Reserve this year.

According to Kitco News, “July ISM manufacturing data was in line with market expectations. However, the PMI number was down from last month. Also, other components within the July ISM data were down from last month. Meantime, July U.S. construction spending was down 1.3%, which is a miss to the downside, as a rise of 0.5% was expected.”

However, this economic data pales in comparison to the importance of the Labor Department’s upcoming jobs report which will be released on Friday. Current estimates predict that 180,000 non-farm jobs were added in the month of July. Friday’s report will be instrumental in the Fed’s decision regarding the current timetable to initiate the next interest rate hike.

This economic data, coupled with geopolitical hotspots in Venezuela as well as North Korea, has reignited gold buyers as they bid up the precious yellow metal by approximately four dollars today. As of 3:15 EDT, gold futures are trading up $3.60 at $1277 per ounce. This is three dollars off the intraday high that gold prices reached when they traded to $1280 per ounce earlier today.

Spot gold is currently trading at $1270.90, a net gain of $2.10 on the day. On closer inspection, traders and buyers bid up gold by $5.40 today, but a strengthening U.S. dollar resulted in a net loss of $3.30 per ounce, according to the Kitco Gold Index (KGX).

Given that U.S. equities have continued to rise in value and continued to create a risk on environment in the financial markets, the precious metals have not only held value well but have continued to appreciate.

With the potential for the current geopolitical hotspots in North Korea as well as Venezuela to deteriorate to a greater extent, there is the real possibility that this current rally in gold will continue.

Wishing you as always, good trading,