Gold prices edged higher, undeterred by an FOMC policy announcement that set the stage for an interest rate hike in December as expected. Traders were hardly surprised by the outcome having all but fully priced it in long before the rate-setting committee issued its statement.
That shifted the focus to who President Trump will choose to lead the Fed after Chair Yellen’s term expires in February. Rumors hinting that the post will go to Governor Jerome Powell drove the yellow metal higher on bets that this is a relatively more dovish choice than Stanford economist John Taylor.
The formal unveiling of the nominee is due at 19:00 GMT. Gold may extend higher if Mr Powell gets the nod as expected, though follow-through may prove to be relatively limited. The Governor is hardly a dove in absolute terms, falling generally in line with the cautiously hawkish FOMC majority.
The post of Vice Chair is also vacant and it is unclear if Mr Trump will also nominate someone to that post today. If he does and opts for Mr Taylor or a similarly-minded alternative, gold may struggle as the overall makeup of the rate-setting committee shifts in a more hawkish direction.
Crude oil prices retreated after EIA inventory data showed stockpiles shed 2.44 million barrels last week. While this exceeded economists’ projections calling for an 877.25k barrel outflow, it fell far short of the 5.09 million barrel drawdown expected.
A lull in top tier oil-specific news flow might set the stage for consolidation in the day ahead. Prices’ sensitivity to overall risk appetite trends should not be dismissed however. S&P 500 futures are pointing sharply lower in Asia Pacific trade, warning that a bout of risk aversion may see crude lose more ground.
GOLD TECHNICAL ANALYSIS – Gold prices remain confined to a familiar range above the 1266.44-69.10 area (October 5 low, 38.2% Fibonacci expansion). A breach of this barrier initially exposes the 50% level at 1257.69. Alternatively, a daily close above support-turned-resistance at 1277.16 paves the way for another test of the October 20 high at 1291.06.
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