The Daily Market Report: Gold Weakens Within Range as Dollar Recovers

USAGOLD/Peter Grant/10-31-17

Gold has turned defensive in the range once again, weighed by a rebound in the dollar. Upbeat U.S. data also buoyed risk appetite and stocks today.

U.S. home prices and consumer confidence continue to rise. The employment cost index jumped as well, which inspires hope that wage growth and then inflation might accelerate. However, as we saw yesterday, the Fed’s preferred measure of inflation remained sluggish in September.

Will that be worth mentioning when the Fed announces policy tomorrow? And if they do, will it temper December rate hike expectations?

The ECB came out with more dovish than expected guidance last week, as did the Bank of Canada. The latter likely had an inkling that the economy had contract in August, as the rest of us found out today.

The Canadian dollar came under pressure as hopes for tighter monetary policy evaporated. The yen also dropped today after the BoJ held steady with no mention of any plans for normalization.

As I mentioned in the Morning Snapshot, it might be in the best interest of the Fed to adopt a more dovish tone tomorrow, to better align with the current policy direction of the other major central banks. No change in policy is expected at this meeting and they will likely leave the door open for a December hike, but a tempering of the high expectations of that hike might be warranted.

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