Gold has been acting more like an alternative to the Dollar rather than a safe haven asset this year, and now it is acting more like risky assets. Such a transformation is due to the unprecedented stimulus package from the U.S. Federal Reserve (Fed). The fact that there is more money in the market at a time when interest rates are low, creates a situation in which gold prices are being pushed up as part of this money is being used to buy gold assets. While gold is acting more like a risky asset, the U.S. Dollar may be seen to be acting like a safe haven asset.
This week this pattern continued. Major issues like the schedule of the Fed’s stimulus measures tapering, uncertainty about the pandemic situation, and the fate of China’s Evergrande developer giant are driving the value of the Dollar up, as risks are seen to be mounting up. The U.S. Dollar index rose from 93.7 to 94.2 points along with the upward trend in September 2021. This upside movement of the Greenback instigated by the recovery of the U.S. economy and expectations about the Fed’s monetary policy tightening, is pressing gold prices to go down from $1771 to $1754 per troy ounce.
However, gold prices volatility is not significant. There are no directional movements, and even closest highs and lows remain unbeatable. The reason for such complacency is the expectation of the monthly Non-Farm Payrolls set of data that is expected to be published on Friday. According to analysts’ expectations, the number of newly created jobs is expected to increase, along with salaries and falling unemployment. These expectations are strongly supported by the ADP data that came out much better than expected with 568,000 new jobs created in September. Moreover, on Thursday the initial jobless claims also fell beyond expectations to 326,000, confirming the recovery in U.S. labour market. This data supports the Dollar and puts pressure on stocks, gold and commodity prices.
Gold prices could be expected to primarily be directed by the Non-Farm Payrolls data. Better than expected data may cause the Fed to put into action the tightening of its monetary policy earlier than expected, pressing gold prices towards the low margin of the current technical channel at $1721 per ounce. Otherwise, if the data shows a worse than expected result then expected gold prices may rise to the upper margin of this channel at $1789 per ounce.
Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.
© 2011-2023 Top Markets Solutions Ltd
This website is operated by Top Markets Solutions Ltd which is registered with the Department of Registrar of Companies and Intellectual Property of the Companies of the Republic of Cyprus as a private limited company with registration number HE272810 and is authorized by the Cyprus Securities and Exchange Commission ("CySEC") to act as a licensed Cyprus Investment Firm ("CIF") with license number 158/11. Top Markets Solutions Ltd operates in accordance with Markets in Financial Instruments Directive (MiFID).
In accordance with CySEC Circular C108, please be informed that the previous name of Top Markets Solutions Ltd was TeleTrade-DJ International Consulting Ltd.
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Top Markets Solutions Ltd ("the Company") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall the Company have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
The Company cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
The Company currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime. The Company does not provide its services to residents or nationals of the USA.
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63.37% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade Europe strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.