• Gold hits five-week high
  • Reaches $1,273.74/oz, highest since April 25th
  • Sterling recovers after UK polls point towards a hung Parliament
  • Expected Fed-tightening capped gains
  • 90-dead in Kabul, further signs of increasing tension in Middle East
  • Trump expected to pull out of Paris Accord and Trump’s anti-Iran axis already feuding

Yesterday gold hit $1,273.74/oz, a level not seen for five weeks. Analysts point to some safe-haven demand for the yellow metal on account of the geopolitical tensions, upcoming UK elections and tomorrow’s non-farm payroll data.

We suggest investors look beyond data releases and political peacocking, and instead look at what the greater picture shows which is uncertainty on all fronts.

All about the Federal Reserve

Amongst mainstream financial analysts, all eyes appear to be on the expected Federal Reserve rate hikes. Thomson Reuters data shows traders see an 87% chance of a 25-basis-point hike at the next Federal Reserve meeting, this month.

Softer economic data of late, may mean that the Janet Yellen and her team might not be so keen to ramp up rates this month. Investigations into Russia’s alleged involvement in the 2016 U.S. election and possible collusion with Trump’s campaign also have clouded the prospect of a rate hike next month. The plan was for two further rate hikes this year in order to tighten the central bank’s balance sheet.

Fed policy tightening is expected to be negative for gold. But times might be changing as we note that in both December and March, following rate rises, gold decided to rally. This might be on account of expectations of over-tightening by the Fed and which would tip the country into a recession. Good news for gold.

Should the Fed over tighten, then they are likely to return forward guidance. As we know this is a great environment for the gold price due to increased inflation and a weaker currency.

Jitters over UK elections

In what feels like groundhog day for many UK-voters, there will be an election next week. To listen to the international media one could be forgiven the election is about Brexit. It is a general election which has consequences far beyond Brexit negotiations. Many of these consequences are unknown, which suggests a positive environment for gold regardless of the outcome.

When the election was initially called it seemed as though Mrs May’s election was a dead cert, however the polls suggest it might not be so easy. This morning news of a YouGov poll commissioned by the Times show Mrs May has a battle ahead of her. YouGov found the Conservative lead has slipped dramatically in recent weeks and is now within the margin of error. In April, when the election was first called, the Tories had a 24-point lead over Labour.

The YouGov Poll also found 30% of respondents think Jeremy Corbyn would be a better Prime Minister, this is the highest it has ever been. Meanwhile, Teresa May’s personalfavourability has slipped to by 2%, to 43%.

Investors would be prudent to remember that whilst Mrs May is using the promise of Brexit to improve the country’s fortunes, the outcome of the ‘divorce’ remains unknown regardless of who is elected. With a Conservative victory the market might feel slightly reassured as there is no change in management, however we are still unsure how Brexit will actually look. A Labour victory is effectively double the uncertainty as we have not seen Corbyn lead, let alone run a Brexit negotiation.

Trump tension

Trump continues to be a cause for concern in both the US and the wider community. Concern comes from the usual basket of goodies the President serves on a daily basis, namely strange tweets, misinformed statements on foreign relations and the desire to show independence when the opposite is required.

One example of this came on Tuesday when Trump tweeted, We have a MASSIVE trade deficit with Germany, plus they pay FAR LESS than they should on NATO & military. Very bad for U.S. This will change,

This tweet from Trump harks back to 1987 when US Treasury Secretary James Baker took issue with German policy. For many this resulted in the stock market crash of October 1987.

This morning the US dollar hovered near a 6-1/2 month low against a basket of major currencies on. Today, markets will also be closely watching for Trump’s announcement on whether or not the United States will continue to be part of the Paris Accord.

Whilst an agreement over whether or not to fight climate change may seem a tenuous link to make with precious metal prices, Trump’s decision will say so much more than his thoughts on global warming. A step away from the Paris Accord shows once again Trump’s desire to focus on his ‘America First’. In isolation the decision might not count for much but is the statement about Trump’s