20th October 2017

Gold prices broke several days of persistent declines on Thursday and bounced off a one-week low as a weaker dollar and falling US equity markets provided an element of support. Although equities recovered a good portion of their losses late in the day to finish roughly flat, the dollar continued to drift lower, with the descent accelerating late in the US session on reports from Politico that President Trump is leaning towards nominating Jerome Powers as the next Federal Reserve chief. Powers is known to be a dove and his nomination will likely weaken the greenback further and possibly provide another shot in the arm to the US equity markets. Both these variables should theoretically offset one another as far as gold is concerned, but of the two, we think that a weaker dollar will likely prevail and give gold more of a short-term boost. However, as we have seen countless times with this particular President, one cannot really count on anything definitive given his tendency to flip positions rather abruptly (as his views on this week’s health care legislation illustrated).