By analyst
By Frik Els
Geopolitical Risk Index computed by Caldara and Iacoviello (March 2018) and is based on the frequency of words related to geopolitical tensions in international newspapers.
Source: TradingFloor.com
Hansen points out that on the first score, gold’s reaction could be positive – the five rate hikes seen so far in this current cycle all resulted gold selling off ahead of the move only to rally strongly once the announcement was made. But there’s a big if.
Hansen says all of these hikes were characterized as being “dovish hikes”, hence the potential negative impact this time round should Jerome Powell strike a more hawkish note (something recent economic data do not warrant).
If the Fed fails to deliver a hawkish hike, gold is likely to find a bid with the focus returning to safe haven and diversification demand:
Gold markets seeing one of the tightest trading ranges in six years while the geopolitical risk index sits at a 15-year high is unlikely to continue.
Gold was flirting with its lowest levels of 2018 on Friday. The most active gold futures contract on the Comex market in New York slid to a low of $1,309.50 an ounce in afternoon trade. The price of gold is still up $80 an ounce compared to this time last year.