Market Overview

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.

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Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.