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Gold loses some shine after two weeks of gains

 

Tuesday, October 11, 2022, 8.45am GMT

The news shaping the markets today

Ukraine said around 14 people had been killed and 97 injured in aerial assaults by Russia on several cities in the country. Continued geopolitical tensions sent the US dollar index higher this morning.


Australia’s Westpac-Melbourne Institute Index of Consumer Sentiment fell by 0.9% to 83.7 from a month ago in October, exerting pressure on the AUD/USD forex pair.


Japan’s current account surplus shrank to ¥58.9 billion in August, from ¥1,500 billion in the year-ago month. The latest reading also missed market expectations of ¥121.8 billion, which sent the JPY/USD pair lower in forex trading this morning.


UK’s retail sales grew by 1.8% from a year earlier in September. However, the FTSE 100 index traded lower on Monday.


New Zealand’s retail card spending rose by 1.4% in September. Despite this, the NZD/USD forex pair remained under pressure mainly due to strength in the US dollar.

 

What’s happening: Gold traded lower on Monday amid the strengthening of the US dollar.

What happened: Gold started the week on a cautious note after two consecutive weeks of gains.

Investors remained on the sidelines ahead of the much-awaited inflation data from the US due this week.

Why it matters: Gold reversed trend and began moving lower on Monday as traders await inflation data from the US, scheduled to be released on Thursday. High inflation could force the Federal Reserve to announce another big rate hike, lending more support to the US dollar.

Although the annual inflation rate in the US had eased to 8.3% in August, the figure came in higher the market expectations of 8.1%. Market experts expect the US central bank to announce another rate hike of 75 basis points at its November meeting.

The strength of the US dollar has impacted gold prices, as an appreciation in the greenback makes commodities and metals priced in the currency more expensive for foreign currency holders. The ICE US Dollar Index, which measures the greenback’s performance versus a basket of major rivals, rose around 0.3% to reach 113.14 on Monday, gaining for the fourth straight session.

Gold for December delivery fell $34.10, or 2%, to close at $1,675.20 per ounce, recording the weakest settlement since the beginning of the month. December silver declined 64 cents, or 3.2%, to settle at $19.615 per ounce, the weakest settlement since September 30.

December copper rose 1.3% to close at $3.4305 per pound on Monday, while December palladium fell by 1.1%, to $2,167.90 per ounce and January platinum settled at $895.80 per ounce, down 2.4%.

What to watch: Traders await the release of the US consumer price index for September on Thursday. Economists project the annualised inflation rate to easing to 8.1% in September, from 8.3% in the previous month. However, the monthly rate is seen rising to 0.2%, from 0.1% in August.

The release of the consumer inflation expectations report, scheduled for release today, will also remain in focus.

The markets today

The British pound will be in focus today ahead of UK jobs data

Context: The GBP/USD forex pair declined on Monday following strong US labour market data released on Friday.

Details: The British pound fell to a 10-day low of $1.1027 in early trading on Monday but pared most of the losses after the Treasury said that the UK will publish its crucial fiscal policy update and independent budget projections on October 31.

The medium-term fiscal plan was earlier scheduled to be announced on November 23. The decision for the earlier announcement comes after the UK financial markets reacted negatively to the new government’s mini budget presented last month.

On Monday, the Bank of England also announced plans to double the maximum size of its daily emergency auction facility from £5 billion to £10 billion. The country’s central bank also launched a temporary expanded collateral repo facility for the banks.

The Bank of England had raised its key interest rate from 1.75% to 2.25% in September. The central bank also said it sees the country’s economy shrinking by 0.1% in the third quarter.

The GBP/USD forex pair fell 0.32% to close at 1.1057 on Monday, amid the strengthening of the US dollar, which climbed for the fourth session in a row to above 113 on Monday.

What to watch: Traders await the release of economic reports on the jobless rate, claimant count change, employment change and average weekly earnings from the UK today. The unemployment rate in the country had declined to 3.6% in the three months to July and is expected to remain unchanged in August. Analysts expect the average weekly earnings including bonuses to rise by 6% year-over-year in the three months to August, versus the previous reading of 5.5% growth.

The release of GDP data, scheduled for Wednesday, will also remain in focus.

Other Markets: US indices closed lower on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.32%, 0.75% and 1.02%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD  – 0.9678 and 0.9697 Negative
USD/CHF – 1.0004 and 1.0016 Positive
WTI Crude Oil – 90.68 and 91.11 Positive
Natural Gas  – 6.509 and 6.544 Positive
Dow Jones – 29162.62 and 29290.30 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (0.9690, -0.14%) Dow ($29,109, -0.52%) Brent ($95.97, -0.2%)
GBP/USD (1.1042, -0.14%) S&P500 ($3,606, -0.52%) WTI ($90.78, -0.4%)
USD/JPY (145.70, 0.02%) Nasdaq ($10,934, -0.46%) Gold ($1,672, -0.2%)

What else to watch today

Turkey’s current account, Italy’s industrial production, US NFIB small business optimism index, Redbook index, and IBD/TIPP economic optimism index, South Africa’s manufacturing production, Brazil’s inflation rate, Russia’s current account, as well as South Africa’s SACCI business confidence index.

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