On Wednesday, gold traded higher amid political worries over President Donald Trump. The dollar tracked lower amid all the global problems and the Fed may hike rates, which should put pressure on any move higher that gold makes. Gold traded higher by 0.6% to $1,243.31 per ounce.

Political Problems

One of the main reasons gold traded higher was because of political worries in the United States. It was revealed that Trump had asked Comey to end a probe between the former national security adviser Michael Flynn and Russia.

Since then Comey has been removed from his position. However, the Attorney General of the United States appointed former FBI Director Robert Mueller to investigate the possible interference of the 2016 campaign by the Russians.

With the focus having to shift to all these political problems, it makes it hard for the white house to focus on other issues such as tax reforms.

Lower Dollar

On Wednesday, the dollar index was lower by 0.2% to $97.89 – hitting a near 6-month low. The last time the dollar index was near that level was around six months ago during the November election.

The dollar index reached its 14-week high of $103.82 back in January. Since then it has fallen 5.8%, despite talks about a possible rate hike. Even the USD/JPY pair suffered a trade loss. The dollar fell by 2.09% against the yen on Wednesday. That was the biggest one-day drop since July.

The dollar falling so much has allowed gold to continue its upward trend. That is because there has always been a correlation between the dollar and gold. The dollar also traded lower thanks to Eurozone economic data. Eurozone GDP for the first quarter grew by 0.5% which was in line with estimates. That shows that the Eurozone economy remains robust. The Euro currency traded higher because of that, causing the dollar to dip.

Fed Rate Hike

What may push gold lower, despite all the global issues, is a Fed rate hike. The Fed is set to host its next meeting in June. There, it will decide if it should raise interest rates in the United States.

If it decides to hike interest rates, the new rates will be brought up to between 1.00% to 1.25%. It does seem highly likely, because the Fed watch puts an interest rate hike chance at around 60%. That is high, and depending upon positive U.S. economic data that number could move up.

The Fed would like to do at least another two rate hikes before the end of the year. The likely outcome of a rate hike would be gold prices heading lower. Gold has not had much success trading higher after a Fed rate hike.

What Binary Options Traders Should Watch For

There are a few things that traders should watch.

The first of which is how the political problems play out over time. Whether or not the Trump situation goes away or gets worse. If claims of Russian interference in the Presidential election continue, then gold should trade higher.

The second item would be the dollar itself. The dollar has traded lower in the past few weeks, allowing gold to trade higher. The main thing to watch is if global issues go away. If that happens then the dollar could recover to higher levels.

The final item that traders should keep an eye on would be the Fed itself. A Fed rate hike would likely pit the U.S. dollar higher. That will definitely cause gold to drop.