Rebound in the U.S. Dollar

The price of gold declined on Thursday amid weakness in the commodities complex and a stronger U.S. dollar.  After rising to near a seven-month high of $1,781.72 per ounce yesterday, the spot gold price fell by $12.32, or 0.7%, to $1,759.04 this morning.  The yellow metal’s sell-off was driven in part by a modest rise in risk aversion across financial markets and a rebound in the U.S. Dollar Index, which advanced 0.7% to 79.595.

Analysts at Marex Spectron wrote in a note to clients that “The rise in gold and silver will be tempered by drops in the stock market and rises in the dollar, and if this continues then the upside is limited for the time being.”  However, the firm added that “support remains under the market and I still believe buying dips is the way forward in the longer term.”

On Wednesday the gold price was unable to build on its recent gains despite the Bank of Japan’s (BoJ) unexpected announcement of an expansion to its quantitative easing program.  The BoJ will increase its asset purchases by 10 trillion yen (¥) – approximately $125 billion – raising its total to ¥55 trillion.  The decision followed similar measures from earlier this month by the Federal Reserve and European Central Bank, as central banks across the globe have shown that they are in a race to debase their currencies to stimulate economic growth.

Commenting on the tepid movement in the price of gold yesterday, Saxo Bank vice president Ole Hansen contended that “The lack of follow-through following the BoJ announcement of additional stimulus yesterday seems to indicate that investors have what they need at this stage, and a correction might be required to attract additional demand…Physical demand looks lacklustre, so it is purely up to the investment community to drive this forward.”

Comments

Post a Comment

Popular posts from this blog

Gold edges up on weaker dollar, dovish U.S. Fed policy bets

Image
 Gold edged higher on Monday, helped by a weaker dollar and expectations that the U.S. Federal Reserve will reiterate its dovish monetary policy stance this week. Spot gold was up by 0.1% at $1,943.58 per ounce. U.S. gold futures rose 0.1% to $1,950.10 per ounce. “Gold is firm on the basis that the Fed could adopt a further dovish message with respect to average inflation targeting,” said Michael Hewson, chief market analyst at CMC Markets UK. “If you want to have a policy of average inflation targeting, you’re going to have to go into detail as to how you are going to arrive at that particular outcome.” The dollar retreated on Mond ay, bolstering gold’s appeal for investors holding other currencies, ahead of the Fed’s policy decision due on Wednesday. “If inflation forecasts remain at 2% or below, this could offer gold a tailwind as the zero-yielding metal thrives in a low-interest rate environment,” said FXTM analyst Lukman Otunuga. Market participants are also wai...
Read more

For the gold price, two outcomes are possible.

Image
For the gold price, two outcomes are possible. First is a return to or near the April low ($1,277.40). Second is a drop to a lower low, $1,240 - $1,260. Yet a third possible outcome is that the June and December lows were not a double bottom and one further drop may come. I account that the least likely, and look for a low here by the end of the week, but I'm no more'n a nacheral born durnd fool from Tennessee, so what do I know?   You'd think that an institution charged with promoting the gold industry would produce reports that at least cast the best light on gold's prospects. You'd think wrong, if you're thinking about the World Gold Council. They've been negative on gold for, oh, the last 14 years or so. Today they issued a report that contained a nugget about Chinese business using physical gold as collateral for bank credit ($40 bn worth) but they managed to tease a gloomy forecast even out of this inventive monetary use. That and bad ...
Read more

The price of gold advanced as high as $1,603.40 per ounc

Image
The gold price broke out to a new all-time high above $1,600 per ounce Monday morning, rising for the eleventh consecutive trading session. The price of gold advanced as high as $1,603.40 per ounce before backing off to trade just the $1,600 level. The yellow metal gained on the back of a surge in borrowing costs for Italy, the latest European nation to see its bond market come under heavy selling pressure. The lack of a deal to raise the $14.3 trillion debt ceiling also helped boost gold prices. The eleven-day rise in the gold price is the longest winning streak since January of 1980. The gold price delivered another noteworthy performance last week, climbing 3.2% on its way to a series of fresh record highs. With Monday’s advance, the gold price extended its monthly and year-to-date gains to 6.6% and 12.5%, respectively. Last week’s two-day Congressional testimony by Chairman Ben Bernanke on the economy and monetary policy revealed that the Fed remains open to the...
Read more