Bullion has rallied 26 percent in 2016, recovering from three years of losses, as low or negative interest rates have strengthened demand. Political uncertainty has also played a part, with the U.K.’s vote to quit the European Union spurring haven demand. Forecasters including Singapore-based DBS Group Holdings Ltd. have said that the U.S. contest may buttress prices amid concern about the possible implications of a Trump presidency.
Gold may be in for a bumpy ride in the final quarter as Republican candidate Donald Trump now has a 40 percent chance of winning the presidential election and investors will be preparing for the possibility of higher U.S. interest rates, according to Citigroup Inc. A probable victory of Donald Trump increases the chances of a single U.S. hike by the end of 2016.
But if it happens other wise, then gold prices are likely to steady during 25-29 September after the US Federal Reserve decided to leave interest rates unchanged, according to analysts.
Bullion has been provoked from inertia after Fed rate concerns had helped wipe out gains for the quarter.
There is once again an inflow of capital in the market as low borrowing costs in the U.S. and economic stimulus by central banks from Japan to Europe drive demand for the precious metal as a store of value.
Over the previous week, gold achieved the best performance since July 2016 with a 2.4% rise, while the US dollar index recoded the worst performance, reaching 95.472 against a basket of currencies.
The precious metal is heading for the biggest weekly advance since July after U.S. central bankers opted to leave interest rates unchanged while reining in their outlook for future increases.
Gold prices edged lower on Friday, but notched the strongest weekly advance in almost two months after the Federal Reserve held off on raising interest rates and scaled back the number of rate hikes it expects next year.
This has once again pushed gold prices upwards and traders are no into the buy-and-hold mode for gold.
The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
Meanwhile, investors will be focusing on a series of important events lined up this week that play a pivotal role in influencing gold prices.
- A pair of speeches from European Central Bank President Mario Draghi is to testify before the Committee on Economic and Monetary Affairs of European Parliament, in Brussels.
- For fresh hints on whether the ECB will step up monetary stimulus in the coming months to boost inflation and prop up the economy.
- Speech by Bank of Japan Governor Haruhiko Kuroda will be eyed in wake of last week’s decision by the BOJ to modify its policy framework
- Focus will also be maintained on the first U.S. presidential debate on Monday between Democratic nominee Hillary Clinton and Republican hopeful Donald Trump
- Other speeches to be given by
-Swiss National Bank Chairman Thomas Jordan
-Bank of Canada Governor Stephen Poloz
-Federal Reserve Vice Chair Stanley Fischer
-BoJ Governor Haruhiko Kuroda is to speak in Tokyo.
- U.S. is to release data on new home sales, private sector data on consumer confidence, publish data on durable goods orders, to publish final figures on second quarter growth
- Fed Chair Janet Yellen is scheduled to testify before the House Financial Services Committee on regulation and supervision, while St. Louis Fed chief James Bullard is to speak in St. Louis.
- The Bank of Japan’s big policy review is likely to see more QE and negative rates in the long run.
- Germany is to publish preliminary inflation data and a report on unemployment change.
- Japan is to release data on inflation and household spending.
- China is to publish its Caixin manufacturing index.
- Germany is to release data on retail sales.
- The U.K. is to report on the current account and publish revised data on second quarter growth.
- The euro zone is to release preliminary data on consumer inflation.
- Canada is to publish data on economic growth.
- The U.S. is to round up the week with data on personal income and spending, a report on business activity in the Chicago region and revised data on consumer sentiment.
Now that series of events are scheduled for the week we expects markets player to be alert and markets to be volatile.