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market Overview - October 27, 2016

09 Jul 2018 - Archive

The gold market continues to be driven by central banks and interest rate policy, and the metal is pushed downward by fears of a rate hike. The U.S presidential election adds volatility to the markets, but Hillary Clinton is the clear front-runner.

In Europe, concerns about Brexit continue to affect the U.K pound while the European Central Bank continues on its dovish course.

U.S Politics & Interest Rates.

In the U.S election, Clinton has begun to build a substantial lead. At this point, the results are almost certain to be in her favor.

The economic effects of a Clinton presidency are not knowable, but her policies may be bullish for oil. The candidate has been critical of the fracking industry and aims to regulate it over environmental concerns. Her regulations would lower supply and increase demand. 

The U.S federal reserve is reluctant to raise rates amid political uncertainty in the markets. However, as the results of the election become more certain such fears become assuaged.

The markets currently place a 9 percent probably on an interest rate hike before the election; the odds jump to 70 percent for a rate hike before the end of the year. 

Asia & Europe

The European Central Bank will most likely continue its 80-billion-euro bond-buying program beyond the month of March; this is intended to help bolster growth in the Eurozone. Brexit fears in the U.K continue to suppress the pound relative to the euro and other currencies.

In Asia, commodity prices are near 3-month highs. The yuan, however, is showing weakness against the U.S dollar. This weakness will magnify if the U.S raises interest rates. Yuan weakness may help Chinese consumers protect themselves from a weakening currency and diversify out of the overheated property market. However, in India the story is different.

Indian gold demand going into the wedding season is much weaker than expected. This data flies in the face of reports from Indian jeweler associations who expected strong growth in the wake of a strong monsoon season. 

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