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Firm US Dollar Stalls Spot Price For Gold

Published on: 11/26/18 11:24 AM

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Category: Currency, Forex, Gold, Latest News, Trading

Firm US Dollar Stalls Spot Price For Gold


Analyst Nick Cawley examined the struggling price of gold in his November 23, 2018, article. Gold prices fell almost 0.5 per cent Friday as the US dollar hit a new one-week high, rebounding after Thursday’s holiday slump. The precious metal lost the gains it managed earlier in the week when the dollar’s strength lagged. Gold is trading at just above the 20-day moving average of 1,221.00 per ounce and the 50-day of 1,216.40 per ounce. The metal’s above-average price may provide some stability for the short term.

  Retail investors remain long of gold, according to the latest IG Client Sentiment Report which tends to take a contrarian view to crowd sentiment. Although the rebounding dollar is pushing gold prices down, recent daily and weekly positional changes tentatively imply that the price of gold may reverse higher.

  The US dollar basket (DXY) is trading upward again after recent Federal Reserve talks wavered on implementing planned rate hikes for 2019. The central bank’s Vice Chairman Richard Clarida spoke to the press, expressing global economic growth concerns and the bank’s possible move to a neutral rate. Although his remarks briefly dampened expectations for the hikes, the DXY largely shrugged it off. Currently, 3 to 4 interest rate hikes are slated throughout 2019 with a 0.25 per cent rate increase expected during the December 2018 meeting. Although the market is not as confident as it once was that rates will increase, the DXY is maintaining a positive outlook as any increase should increase the strength of the dollar.

USD and weakening EUR


Additionally, the US dollar’s value is increasing against the basket because of the weakening euro. This weakening is particularly significant because over half of the index’s value is defined by measuring the US dollar against the euro. The EUR decline began when the Purchasing Managers’ Index (PMI) growth fell short and the November IHS Markit report highlighted the news. The Markit analysts revealed that business activity in the Eurozone grew at its weakest degree in almost four years. Exports from the region are deteriorating and hurting the manufacturing industry significantly. Exports from the Eurozone are primarily manufactured goods, principally vehicles and machinery.

The rate increases and faltering foreign economies are strengthening the dollar, although only slightly for now. This trend is weighing on the spot price of gold but the higher moving averages and retail investors’ holdings may indicate a pick-up in price. However, the increase in gold prices may be slight and short-lived.