The Daily Market Report: Gold Jumps as Risk Appetite is Tempered


USAGOLD/Peter Grant/10-10-17

Gold jumped back above $1290 in earlier trading, driven by strong physical demand from India and China. Risks appetite has been tempered this week by heightened geopolitical tensions and a loss of monetum for President Trump’s tax plan.

Catalan President Puigdemont was supposed to speak before the parliament about an hour ago, but that has not happened yet due to a reported disagreement about the text of the declaration. Speculation is that he will declare independence from Spain, or at least lay-out a path to independence. Spain is adamantly opposed to such a move and is prepared to arrest Puigdemont.

Despite the rising level of uncertainty — and the persistent unevenness in U.S. economic data — markets continue to believe the Fed will raise rates in December. It seems to be in the best interest of the Fed to stoke those beliefs in order to keep asset bubbles at least somewhat in check.

If markets get the sense that the economy is slowing and the Fed is going to remain on hold through year-end, the bubbles could continue to inflate leading to an untenable situation. The current situation where any news — good or bad — is good news for stocks, can’t go on indefinitely.

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