Gold Steadies as Markets Consider the FED Chair Effect

Gold looked to reverse declines from the early part of the week, as sentiment towards a significantly more hawkish FED in the hands of Stanford economist John Taylor eased through the early part of the day.

The Taylor Law has projected that interest rates should be three times higher than current levels, with Taylor known to be a hawk, but as the markets and many of the FOMC hawks know too well, it’s not just down to the views of the Chair and the hawks, with the doves having curtailed a more aggressive rate path over the last 18-months, despite a continued improvement in U.S economic conditions and tightening labour market.

With the U.S President scheduled to meet with current FED Chair Yellen tomorrow, it remains unclear who the favorite is and if in fact a more hawkish candidate would be able to instill a more aggressive Committee attitude towards policy.

Gold finds support as Chinese Premier Delivers Opening Speech

Risk appetite through the early part of the day was limited as the markets took a more cautious approach as the markets look for any intentions by the Chinese government to begin addressing corporate China’s mounting debt crisis and its infrastructure plans for the next 5-years.

Equity market stability through the Asian session may leave gold on the back foot going into the European session however, with the ASX200, Hang Seng and Nikkei flat at the time of writing, the CSI300 up 0.43%, defying the traditional declines going into the National Party Congress.

From a data perspective, stats out of the U.S are limited to September housing data and the Beige Book, which will likely have limited impact on the direction of gold through the day, while FOMC members Dudley and Kaplan could influence should there be any hawkish sentiment towards the U.S economy and monetary policy.

Oil prices continued to move northwards, with WTI putting more distance between itself and $50 per barrel as the markets responded to the larger than expected draw down according to the API numbers out of the U.S late on Tuesday. Indicators are bullish for crude at present, with risk of supply disruption and rising tensions between the U.S and Iran adding to the appetite ahead of this afternoon’s weekly EIA inventory figures. Time will tell how far the rally will run, with the markets all too aware of the readiness of U.S shale producers to crank up production at a drop of a hat.

Silver outpaced gold through the early part of the Asian session this morning, supported by a softer U.S Dollar and market caution through the opening speech of Chinese Premier Xi at China’s National Congress.