SMM News - What is the ultimate driver of gold? | RJO Futures

January 24, 2017 2:15AM CST

“Gold could get a short-term bounce from uncertainty about a new Donald Trump administration, but ultimately the metal’s direction likely will be influenced by future monetary policy of the Federal Reserve,” said Bob Haberkorn, senior commodities broker with RJO Futures.

“There is a big unknown,” he says about specific policy changes after the change of power in the U.S. “I think we have more upside to go.” However, that boost could be limited while the market continues to digest how aggressive the Fed might be in upping interest rates, he continues.

“The theme is still the Fed,” Haberkorn said. “What’s the Fed going to do?” Higher U.S. interest rates tend to hurt gold, and vice-versa, since tighter monetary policy underpins the U.S. dollar and increases the so-called “opportunity cost” – or lost interest earnings – of holding a non-yielding asset like a precious metal, Haberkorn added.

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