two major abilities. One is that it is traditionally considered to be a safe
haven asset that is in high demand during times of elevated risks in the
market, rising inflation, and geopolitical uncertainties. The second is that it
acts as an anti-dollar indication because gold prices mostly move in the
opposite direction to the Dollar. The Dollar itself has become a safe haven
asset in recent months as the Federal Reserve (Fed) has risen interest rates along
with Treasuries yields. So, gold prices are now more correlated with the
irrational market life sometimes breaks traditional molds. Countries with
positive trade balance were seeking for a weaker national currency to benefit
their exports. Weak Euro, Swiss Franc, British Pound and similar currencies are
dependent on their exports. Thus, weaker nation currency support exports and
increase budget revenues. Thus, a giveaway game continued for decades. Whoever
has a weaker currency seems to be the champion.
pandemic and Russian warfare in Ukraine became a game changing environment in
Pound suffered over the last month when it plunged 7% from 1.3112 below the
1.2200 level. However, the Greenback is responsible for most of this dive. It has
been heavily rising across the market since the Federal Reserve (Fed) began to
tighten its monetary policy and increasing interest rates. Geopolitical, inflationary, and stagflation risks usually draw
investors towards the safe haven U.S. Dollar.
Dollar index (DXY) that measures the currency basket of the Dollar against six
major currencies, rose from 99.8 points to 104.
strong corporate reports seem to be trying to launch a counterattack against
the red sea of stock index losses. More than 150 companies from the S&P 500
broad market index have delivered their quarterly earnings reports, and more
than 80% of them beat consensus profit expectations of analyst polls.
had a dramatic start to the week as prices plummeted by 13% to $2061 per ounce
on Monday. Prices were at $2500-2530 in the middle of April. Fears over
unprecedented pandemic lockdowns in China caused demand for industrial metals,
including palladium, to dive. Falling equities and other risky assets has contributed
to the decline, along with the expected tightening of the monetary policy of
the Federal Reserve (Fed), that is expected to announce another sharp interest
rate hike next week and may continue to do so after every meeting this year.
some correction of the U.S. Dollar index from 101 to 100 points, more factors seem
to be pointing towards the further strengthening of the Greenback rather than
for its decline, and the recent drop may be rather distinguished as a
correction to the upward trend.
for a steeper angle of interest rate hikes by the Federal Reserve (Fed).
Investors are considering the 96% probability of a 50 basic point interest rate
hike from 0.5% to 1.0% to be announced the May 5 meeting.
meeting on Thursday the European Central Bank (ECB) trumpeted a more hawkish tune when revealing
its monetary policy perspectives. The ECB plans to reduce its bond-buying
program under APP to 30 billion Euros in May and to 20 billion Euros in June
from the current 40 billion Euros a month. The program itself is planned to be
terminated somewhere during Q3 2022.
declaring this the ECB has joined the approach of other major central banks
that have already lifted interest rates, but without actually doing so.
released March economic data for the Eurozone highlights elevating economic
troubles and investors’ pessimism. The Business and Consumer Survey, which
measures the level of confidence in the Eurozone, fell to 108.5 points from the
previously 113.9 points. The survey also showed that Business Climate, that provides
a general look at business health for a period, fell to 1.67 from 1.79 and the
Industrial Sentiment dipped to 10.4 from 14.1.
Tin prices are
strongly correlated with the global economic recovery and financial risks that
depend on monetary policy of the leading central banks. After a phenomenal
upside exaggerated by the military warfare in Ukraine to $49,400 per tonne in
early March, an impressive correction followed.
have stabilised after the initial shock of the Russia-Ukraine clash has
subsided and the Federal Reserve (Fed) hiked its interest rates for the first
time in four years.
and the decision of the U.S. Federal Reserve (Fed) to hike interest rates by a quarter
percentage point for the first time since 2018 on Wednesday certainly affected the
monetary policies of other central bankers, including the Bank of England (BoE). British monetary policymakers raised the base
rate for a third time over a period of months, to 0.75% from 0.5%.
After this decision the
Pound fell to the U.S. Dollar from 1.3200 to 1.3100 and at first sight this may
seem to be paradoxical or controversial after such a rise. But there is solid
logic behind it.