Gold Falls On Oil & USD Strength
Gold Plunges
Gold prices are on watch today after the futures market plunged to fresh lows for the month yesterday amidst the ongoing USD rally. A hawkish shift in traders’ Fed expectations has weighed heavily on gold. The market is now pricing in a more than 70% chance of a Fed hike next month, up from just 50% at the start of last week. This shift comes on the back of a slew of hawkish Fed commentary last week with several policymakers warning over the risk of inflation becoming entrenched at higher levels, warranting the need for further tightening.
Oil Prices Weighing
Higher oil prices and a stronger US Dollar are weighing heavily on gold prices here and the market looks vulnerable to further downside near-term. Trump this week refused Iranian terms submitted for the reopening of the Strait of Hormuz and Iranian officials are themselves warning that a deal ahead of the November 3rd US midterms unlikely. As such, and with Houthi attacks on Saudi Arabia continuing, oil prices have room to push higher, taking US inflation expectations (and USD) with them. Against this backdrop, gold prices are at risk of further downside. Indeed, downside could be amplified later this week if we see fresh strength in US jobs data, sending October rate-hike expectations and USD higher.
Technical Views
Gold
The sell off in gold has seen the market breaking down below the 4,204.01 level with price now testing deeper support at 4.092. Momentum studies signals are bearish here and while price holds below 4,204, risks are pointed towards a continuation lower to the 3,940.25 bear-target.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.