Reload gold below $1,250
By Yann Quelenn
Markets are over-optimistic. Reloading gold positions below US$1,250 an ounce is going to be a great bargain.
Gold is now trading around $1,273, down around 0.25% in the last 24 hours. The price is sliding over reports that US President Trump will nominate John Taylor as Chair of the US Federal Reserve. Taylor, who would take office in early 2018, strongly supports increasing interest rates to 1.25%. Moreover, the October US Manufacturing PMI index climbed to 54.1 from 53.1 a month earlier.
But clouds are out there that will boost a flight to gold. The North-Korean threat is not being taken seriously by markets (it pushed the precious metal’s price from $1,200 to $1,325 between July and September). Some reports on the US economy are soft: September building permits slowed to 1.22 million versus a 1.25 million estimate; housing starts missed forecasts of 1.18 million at 1.13 million. Just a bit more bad news could send gold on its way up again.
Aussie to drop more
By Arnaud Masset
We’re bearish on the Australian dollar against the US dollar, first because politics are reviving the reflation trade. Second because the US Federal Reserve has hit the button to start selling bonds and to lift borrowing costs by yearend.
The Aussie took a hit in Wednesday’s Asian session, after release of disappointing inflation data. The AUD/USD slid to 0.7707, its lowest since mid-July. Investors are discounting a hawkish shift from the Reserve Bank of Australia, and the Australian economy has disappointed. Early this year, it seemed the country had reduced its dependence on mining and that price pressure was finally picking up. But over the last few month, retail sales went negative and the RBA’s latest meeting suggest no interest-rate before at least mid-2018.
The consumer price index growth fell to 1.8% annually (versus 2.0% expected) compared to 1.9% in the second quarter. The trimmed mean measure held at 1.8%, below expectation of 2.0%.