Gold Rises as Dollar Falls, Gold prices rose on Tuesday, snapping a four-session slump, as the dollar retreated and investors awaited cues on the U.S.

Topic
Federal Reserve’s monetary policy path
The Fed’s Last-Minute Rate Hike
The U.S. nonfarm effect

Federal Reserve’s monetary policy path

The Fed is widely expected to leave interest rates unchanged at its two-day meeting that ends on Wednesday,
but traders will be looking for clues on the central bank’s plans for future rate hikes.
A weaker dollar makes gold cheaper for holders of other currencies,
while higher rates could dent demand for non-yielding bullion.
Spot gold was up 0.3% at $1,281 an ounce by 1007 GMT after falling
to a more than one-week low of $1,274 in the previous session when it dropped
below key technical support around its 200-day moving average.
Gold fell nearly 2% last week in its biggest weekly percentage drop since early July 2016

Spot gold was up 0.6% at $1,747.82 per ounce on Thursday morning as the US dollar stalled its rebound,
offering the precious metal a chance to find firmer footing around the mid-$1700 region.
US gold futures rose 0.5% to $1,748.90 as traders await further direction
from key technical levels and fresh fundamental catalysts.
“The US dollar’s stalling rebound is offering spot gold the chance to find a firmer footing
around the mid-$1700 region for the time being,”
said Han Tan, chief market analyst at Exinity, from a technical perspective.
However, bulls need to overcome resistance at $1750 in order for prices
to target a move back towards last week’s highs of $1775.

The Fed’s Last-Minute Rate Hike

The government made a wise decision by making gold less expensive for foreign buyers.
The dollar has recently risen in value versus all major currencies.
This has increased the cost of gold for international buyers, perhaps leading to reduced demand and prices.
The government hopes to boost demand and keep prices constant by making gold more affordable to foreign purchasers.

The minutes from the last Federal Reserve meeting are due out tomorrow,
and traders and investors are eagerly awaiting them.
There is wide expectation that the Fed will announce a 50-basis point rate hike in December,
with rates peaking in June. This would be a major shift from the recent narrative of a “pivot” by the Fed,
which has been seen as bullish for gold prices.
If the Fed does indeed hawks swoop back in and disrupt this narrative once more,
it could see gold prices unwinding some of their recent gains and testing support around $1700 an ounce.

The U.S. nonfarm payrolls and inflation prints due before the December Fed meeting are likelier catalysts for bullion’s next big moves. Gold prices have been on a tear lately, hitting new all-time highs in multiple currencies. The precious metal is up more than 25% this year as investors seek safe havens amid the Covid-19 pandemic and economic uncertainty.

While gold could continue to rise in the near term, some analysts believe it could be ripe for a pullback after such a strong run-up. That said, key data releases from the U.S., including nonfarm payrolls and inflation numbers, could provide direction for gold prices in the lead-up to the Federal Reserve’s December meeting.

The U.S. nonfarm effect

A better-than-expected jobs report could ease concerns about an economic slowdown and put pressure on gold prices as risk appetite improves. On the other hand, if inflation comes in higher than expected, it could add fuel to fears of stagflation and send gold prices even higher

“The U.S. nonfarm payrolls and inflation prints due before the December Fed meeting are likelier catalysts for bullion’s next big moves.” Said Tan

With interest rates on the rise, many traders and investors are wondering what this means for gold. While higher interest rates tend to be negative for gold prices, there are a few things to keep in mind. First, the Fed has said that they will be gradual in their rate hikes. Second, inflation is still relatively low. And finally, while gold doesn’t offer any yield itself, it can still act as a hedge against inflationary pressures. So while higher interest rates may not be great news for gold prices in the short-term, longer-term prospects remain positive.

Spot silver climbed 2.1% to $21.28 per ounce on Wednesday, extending its gains for the third straight session. The white metal was boosted by safe-haven demand as investors sought refuge from volatile equity markets. Platinum added 1.1% to $993.29, and palladium gained 0.6% to $1,876.

Gold Rises as Dollar Falls

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