Gold rises on US dollar weakness

The news shaping the markets today

Finland joined the NATO military alliance in a major blow to Russia in its ongoing war with Ukraine. The safe-haven US dollar index fell slightly this morning.

The Reserve Bank of New Zealand increased its official cash rate by 50bps to 5.25% during its April meeting, lending support to the NZD/USD forex pair.

Singapore’s S&P Global PMI rose to 52.6 in March, from 49.6 in the previous month. This being the strongest growth in the sector since November 2022 sent the SGD/USD pair higher in forex trading this morning.

Australia’s Ai Group Manufacturing Index rose by 11.9 points to a reading of 5.6 points in March, which lent support to the AUD/USD forex pair.

The Philippines said food prices rose by 9.3% year-over-year in March, following a rise of 10.8% in the previous month, which sent the PHP/USD pair lower in forex trading this morning.

What’s happening: Gold recorded the sharpest daily gains in three weeks on Tuesday.

What happened: Gold jumped to its highest level since March 2022, surpassing the key $2,030 level as traders assessed recent economic reports.

A decline in the US dollar on Tuesday also lent support to the yellow metal.

Why it matters: The US released weak economic data, which increased speculations of the US Federal Reserve putting a pause to its aggressive money tightening.

However, a sharp rise in oil prices following the unexpected output cut by the OPEC+ (Organization of Petroleum Exporting Countries and its allies) also lent support to gold, as the yellow metal is traditionally considered a hedge against inflation.

The US dollar recorded losses after data released on Tuesday showed job openings in the country falling to around a two-year low in February and a decline in factory orders.

The number of job openings fell by 632,000 to 9.9 million in February, reaching the lowest level since May 2021. The figure was also below market estimates of 10.4 million. New orders for US manufactured goods contracted by 0.7% in February, after a 2.1% decline in the previous month and more than market expectations of a 0.5% contraction.

On Monday, the ISM manufacturing PMI also signalled a fifth consecutive month of contraction in US factory activity.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.5% to 101.59 on Tuesday. Weakness in the US dollar generally provides gold cheaper for foreign currency holders and increases demand for the yellow metal.

Gold for June delivery jumped $37.80 to close at $2,038.20 an ounce. Tracking gold’s rally, the white-metal silver also added $1.08 to reach $25.10 an ounce.

May copper declined 8 cents to $3.97 a pound on Tuesday, while platinum jumped to $1,029.0 and palladium settled at $1,455.70.

What to watch: Traders will keep an eye on comments from central bank officials regarding their monetary policy. The US dollar will also remain in focus.

The markets today

The British pound will be in focus today ahead of a basket of economic reports

Context: The GBP/USD forex pair rose on Tuesday, surging past the major level for the first time since June 2022.

Details: The British pound had lost around 10.6% last year but has made a strong rebound so far this year. The sterling has gained around 3.4% year to date to become the best performing G10 currency. It also recorded its biggest monthly gain in four months in March, adding around 2.6%.

The Bank of England’s Chief Economist Huw Pill hinted at another rate hike in May, which lent support to the sterling on Tuesday. Last month, the BoE had increased its main interest rate from 4% to 4.25%, its 11th rate hike since it started to raise rates in December 2021.

UK’s inflation accelerated to 10.4% year-over-year in February, with food inflation rising to its highest in over 45 years. With rising inflation, speculations are in favour of the BoE increasing interest rates by another 25 basis points in May.

Weakness in the US dollar also provided support to the GBP/USD forex pair on Tuesday. The pair gained around 0.8% to 1.2500, after hitting its strongest level in ten months.

Against the euro, the British pound gained around 0.2% to 87.65 pence, after climbing to its highest level since March 20.

Meanwhile, London equities snapped a six-session rally. The blue-chip FTSE 100 fell 0.5% to close at 7,634.52 on Tuesday, amid losses in energy, tech, and materials shares. The domestically focused FTSE 250 declined by 0.34% to settle at 18,815.04.

What are expectations: Traders await economic reports on new car registrations, composite PMI and services PMI from the UK today. The S&P Global/CIPS services PMI is expected to decline to 52.8 in March, from 53.5 in February, while composite PMI is projected to decline to 52.2 in March, from the 8-month high level of 53.1 in the previous month. UK new car registrations, which climbed by 26.2% year-over-year to 74,441 units in February, are expected to rise 19.5% in March.

Other Markets: US trading indices closed lower on Tuesday, with Dow Jones index, S&P 500 and Nasdaq 100 down by 0.59%, 0.58% and 0.37%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Germany’s factory orders, composite PMI, services PMI and new passenger car registrations, Russia’s composite PMI and services PMI, France’s industrial production, composite PMI, services PMI and new passenger car registrations, Spain’s industrial production, composite PMI, services PMI and consumer confidence indicator, South Africa’s S&P Global PMI, Italy’s composite PMI, services PMI and retail sales, Eurozone’s composite PMI and services PMI, US MBA mortgage applications, ADP employment change, balance of trade, composite PMI, services PMI, ISM non-manufacturing PMI, gasoline stocks change, crude oil inventories and distillate stocks, India’s money supply M3, Mexico’s consumer confidence, consumer price index and gross fixed investment, Canada’s balance of trade, Brazil’s composite PMI, services PMI, as well as Argentina’s industrial production.