Gold prices were held close to a seven-year high Wednesday. The UK election due Thursday has generated a degree of instability in various markets. The situation was made more complicated by the increase in the US dollar against the euro. This happened because reports were circulated that the ECB (European Central Bank) was about to reduce its inflation forecast Thursday.
In addition to the expected Thursday occurrences, the increase in the dollar value made gold more expensive in terms of non-dollar currencies. This has the natural effect of reducing demand for gold. Spot gold reduced 0.3% to $1,289.8 per ounce although on Tuesday it had reached $1,295.97, its highest level since November 2016.
The gold market is being affected by the UK election and by US politics. Another factor involved is the testimony given by James Comey, the former FBI Director sacked by Donald Trump. This could harm the president’s plans to revise taxes and toll back certain aspects of regulation. In the UK, if the Conservative leader Theresa May fails to get a good majority in the House of Commons, then Britain’s position regarding exit talks from the EU, or Brexit as it is commonly known would be significantly weakened.
The Federal Reserve FOMC meeting is due next week (13-14 June). Traders expect a rate hike to be announced at that meeting. This would affect gold prices. However, the dovish approach by the Fed may result in good news for gold.
Most precious metals are dropping in value. Platinum fell by 0.6% while palladium fell by 1.5%. Both these metals play a part in the automotive industry. Both these metals are used as auto-catalysts, the former for diesel fuel and latter for gasoline-based fuel.
As vehicle sales drop, so too do the prices of these two metals. Silver has also been affected, dropping 0.4% to $17.60 and ounce. Nevertheless, platinum and palladium stand at $950.50 and $850.50 an ounce respectively Wednesday.
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