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Gold Surges on Trump’s Immigration Action, Rising Inflation

January 30, 2017 at 18:18 by Andrew Moran

Gold prices are being supported on Monday by the elections in Europe and US President Donald Trump‘s recent policies. The yellow metal, which suffered its first weekly loss in 2017 last week, has touched the important $1,200 threshold once again, and is being used as a safe haven asset from the chaos.

February gold futures surged $8.90, or 0.66%, to $1,200.00 per ounce at 16:49 GMT on Monday. This comes as gold suffered a weekly loss of 1.4% last week. Gold has been regularly trading above and below the $1,200 mark.

Silver is also trading in positive territory. March silver futures rose $0.03, or 0.20%, to $17.17 an ounce. Silver also recorded a weekly loss of 0.1% last week.

Gold futures are making gains due to a wide array of factors, including signs of rising inflation, a selloff in US equities, the upcoming elections in Europe, and President Trump’s latest executive orders.

The personal-consumption expenditures (PCE) index climbed in December at its highest pace in more than two years. The PCE jumped 0.2% last month to an overall annual rate of 1.6%. This comes as consumer spending surged 0.5% in December, which is the biggest increase since 2009.

Meanwhile, traders are selling off US equities due to the chaos that has arisen due to Trump’s recent executive order. The move, which has garnered a lot of heated criticism all over the world, temporarily withholds visas from citizens of seven Middle Eastern countries. The order references previous laws that placed three of the nations — Iran, Sudan, and Syria — as “state sponsors of terrorism” and four of the nations – Iraq, Libya, Somalia, and Yemen — as “countries of concern” who cannot participate in the Visa Waiver Program, according to the Visa Waiver Program Improvement and Terrorist Improvement Act of 2015, which was legislation signed by President Barack Obama.

Gold was also supported by the US dollar shedding its gains as investors become concerned about parking their money in the US. A higher greenback makes commodities like gold and silver more expensive for foreign investors to purchase.

There remains a growing level of uncertainty surrounding the upcoming elections in The Netherlands, Germany, and France.

One of the reasons why gold prices are not making bigger gains is because traders are getting ready for a closely watched labor market report on Friday. Another reason is because the Federal Open Market Committee (FOMC) is scheduled to kick off a two-day policy meeting on Tuesday. The FOMC meeting could give greater insight as to whether or not the Federal Reserve intends to move ahead with its three hikes to interest rates this year.

Gold is sensitive to rising rates because it lifts the opportunity cost and sends traders fleeing into yield-bearing assets.

The Chinese stock market remains closed until Thursday for the Lunar New Year celebration.

If you have any questions and comments on the commodities today, use the form below to reply.

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