There has been a sharp rise in the price of gold in the last month as the dollar tumbled hard due to miss commitment of Mr. Trump, the newly elected U.S president. The price of gold sharply fell in the global market after the FED hike their interest rate in the basis of 25 points in the month of December. Most of the leading gold investors were in fear to see the strong bearish momentum in the gold market. However, the dollar erased most of its strength in the global economy prior to the Christmas holiday as Mr. Trump didn’t increase the fiscal spending of their country. Moreover, he also promised to reduce the tax of the U.S citizen but failing to do so created a strong negative impact on the U.S dollar. Things become further complicated and the dollar becomes broadly weaker from the very beginning of the year 2017.The price of gold rallied higher in the global market in the last month. However, in the last week, the dollar gained some bullish momentum in the market and pushed the price of gold lower in the global economy prior to market closing.
Sharp slip in gold price: In the last Friday the price of gold tumbled hard in the global economy as Mr. Trump stated about tax reform in a meeting with the Japanese President. He also stated that the U.S government is most likely to bring the new tax reform in action within next three weeks. Such a short specific duration from the U.S government gave the dollar bulls a solid bullish push in the global market. During that event, the price of gold sharply fell in the global market since it’s valued at a dollar a slight variation in the value of the green bucks significantly affect the gold market. The price of gold was down by 1.12% in the Comex division of the New York Mercantile Exchange and it traded at $1223.00 the lowest level since 6th February 2017.In Thursday’s session, the April contract ended with a cumulative drop of 0.22% and traded at $1236.80 an ounce. According to the leading economist, the price of gold might fall to a decent extent in the global market as there is strong chance for the dollar bulls to take control of the market. However, though the dollar is broadly supported in the global economy but still it needs solid push to threaten the gold bulls in the market.
Possible rate hike in March: Most of the gold investors are now overly cautious since the FED have declared that they are going to hike their interest rate at least three times this year. According to the FED rate hike monitor tools, there is 60 percent chance of rate hike in the month of March and if the FED manages to go for a rate hike in the month of March than there will be a sharp fall in the gold market. Though the gold market rallied higher in the past month but considering the long term scenario the gold bulls have lots of obstacles in near future. The FED will be pressurized by the U.S central for at least two rate hike before the month of November so that they can adjust the current inflation rate. And if the FED manages to go for two rate hike then the gold market will again resume in bearish movement in the global market. However, FED will be extremely cautious about their next rate hike since an immature rate hike will significantly weaken the U.S economy. According to the leading investors, an immature rate hike will have a long-term negative impact on the U.S economy.
Mixed sentiment in the U.S economy: Most of the leading investors are now in doubt since they are not getting any clear clue about the MR. Trump activities. Mr. Trump stated that they will increase their fiscal spending and incorporate tax cut policy in their government two months ago but this statement has not yet been fully filled. However, in the last meeting with the Japanese President, he stated that he is going to reform the tax in next three week. Most of the investors are now in doubt about this statement since a failure to do so will significantly weaken the U.S dollar in the global economy. If he fails this time than the gold bulls will exhibit strong bullish rally in the market but if he manages to implement his statement than an imminent bearish threat prevails in the gold market. Currently, the U.S consumer sentiment is a little bit positive due to Mr. Trump recent statement. If the positive tone prevails in the upcoming week then we will see a bearish move in the gold market towards its next critical support level. On the contrary, the dollar still remains broadly supported in the global market due to recent upbeat U.S data prior to market closing.
Summary: There has been a massive confusion in the gold industry as Mr. Trump again stated about tax reform of their state. If Mr. Trump manages to do this within next three week than the gold market will face extreme selling pressure and failure to do so will bring a solid bullish rally in the price of gold. On the contrary, there is 60 percent chance of rate hike by the FED in next month which also gives solid support to the dollar bulls in the market. Considering all the parameters the overall sentiment of the gold market is mixed and it’s better to stay on the sideline.