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Gold edges higher ahead of US inflation data

Tuesday, September 12, 2023

Today’s headlines

What’s happening: Gold prices edged higher on Monday, amid weakness in the US dollar.

What happened: Gold has struggled to get into an uptrend since early August with the strengthening US dollar and rising Treasury yields.

The greenback taking a breather on Monday lent support to the safe-haven rival.

Why it matters: The US dollar has rallied since early September, reaching a six-month high last week, which has exerted pressure on gold prices. A stronger greenback generally makes commodities and metals more expensive for foreign currency users.

Treasury yields also rose, weighing on the yellow metal, as higher bond yields increase the opportunity cost of holding non-yielding assets like gold.

However, the US dollar reversed trend on Monday, as the Japanese yen rose sharply following comments from Bank of Japan Governor Kazuo Ueda indicating that the central bank could end its negative interest rate policy.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, lost around 0.5% to 104.57 on Monday.

Gold futures snapped a three-day decline on Friday to close slightly higher and extended gains at the start of the week.

Gold for December delivery gained $4.50, or 0.2%, to close at $1,947.20 an ounce on Comex on Monday, following a 1.2% decline in the prior week.

In other metals trading, December silver added 21 cents, or 0.9%, to settle at $23.38 an ounce, after falling around 5.7% last week. December copper gained 2.4% to $3.81 a pound, while platinum for October delivery rose 0.8% to $902.30 an ounce and December palladium climbed 2.3% to $1,219.20 an ounce.

What to watch: Traders will watch the August consumer price index, due to be released on Wednesday, to get further insights into the Federal Reserve’s monetary policy. Annual inflation rate in the US, which rose to 3.2% in July, is expected to accelerate further to 3.5% in August.

Markets will also continue monitoring the US dollar and Treasury yields, which are expected to continue impacting gold prices ahead.

The markets today

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

Context: The GBP/USD forex pair gained on Monday, following a sharp decline in the US dollar versus the Japanese yen.

Details: Bank of Japan Governor Kazuo Ueda hinted of the possibility of the central bank ending its policy of negative interest rates, which provided a boost to the Japanese yen on Monday. The yen surged the most in two months versus the US dollar following BoJ Governor Ueda’s comments.

Weakness in the US dollar also lent support to the British currency on Monday. The GBP/USD forex pair lost around 1% last week, following strong economic reports from the US. Despite this, the British pound is still higher by more than 20% since hitting record lows last September and has added around 3.4% year to date.

The Bank of England is scheduled to meet next week, and traders widely expect the UK central bank to hike interest rates by 25 basis points.

The GBP/USD forex pair gained more than 0.3% to 1.2508 on Monday.

What to watch: Investors await the release of employment data from the UK today. The unemployment rate in the UK, which rose to 4.2% in the three months to June, is expected to remain unchanged in July. The number of people in work, which declined by 66,000 in the three months to June, is projected to decline by 80,000 in July.

Analysts expect average weekly earnings, including bonuses, to rise by 8% year-over-year in July, following 8.2% growth in the three months to June. Analysts expect the number of people claiming jobless benefits to rise by 17,000 in August, after increasing 29,000 in July.

Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.25%, 0.67% and 1.19%, respectively.

The news shaping the markets

Ukraine said it has successfully regained control of drilling rigs in the northern Black Sea from Russia, which sent the safe-haven US dollar index slightly higher this morning.


Australia’s NAB business confidence index rose to 2 in August, versus a reading of 1 in the previous month, and lent support to the AUD/USD forex pair.


The Philippines said its net foreign direct investment declined by 3.9% year-over-year to $0.48 billion in June, which sent the PHP/USD pair lower in forex trading this morning.


New Zealand’s number of visitor arrivals jumped by 59.3% year-over-year to 213,800 in July, lending support to the NZD/USD forex pair.


Mexico’s industrial production rose 4.8% year-over-year in July. This eased from a 4.9% surge in the prior month and sent the MXN/USD pair lower in forex trading this morning.

What else to watch today

Spain’s inflation rate, Turkey’s retail sales, Eurozone’s ZEW economic sentiment index, Germany’s ZEW economic sentiment index, current conditions index and current account, US NFIB small business optimism index, Redbook index and American Petroleum Institute crude oil stocks change, Brazil’s consumer price index, India’s manufacturing production, retail price inflation, industrial production, total passenger vehicle sales, as well as Turkey’s total motor vehicles production.


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