A broadly stronger greenback depressed demand for gold, which promptly sent prices for the yellow metal hovering near four-month lows on Monday’s trading session.
On Friday, a robust report on US retail sales was released. Data revealed that retail sales climbed 0.6% last month, coinciding with analysts’ expectations.
Additionally, the US producer price index (PPI) inched up 0.3% in September, compared to expectations for a rise of 0.2%.
These upbeat data added to hopes for an upcoming US rate hike after the minutes of the Federal Reserve’s September policy meeting showed in the prior week that many of the voting members deemed a rate hike would be warranted "relatively soon", should the US economy continue to improve.
The events resulted to the dollar rocketing to a seven-month peak against other major currencies. However, as of writing, the dollar pulled away from its high of 98.16 ahead of the release if US industrial production and manufacturing activity in the area of New York. It is down by 0.10% to 97.97.
Even so, gold futures still dipped by 0.03% to $1,255.15 per troy ounce on the New York Mercantile Exchange (NYMEX), lingering close to a four-month trough of $1240.97. Contributing to the gold’s decline on Monday is a rather busy week of policymaker comments— a plunge of key Chinese data and with remarks from Bank of Japan Governor Haruhiko Kuroda noted.
On the chart below for gold futures, the four-month low was hit on October 7. This was on event that expectations for a Fed rate hike were escalating after the release of another solid US jobs report. Evidently on the daily timeframe, gold had its biggest plunge on October 4 which was caused by optimistic data on manufacturing activity. As evidenced before, a string of upbeat reports on US data pushes the dollar greatly, and this dampens demand for the precious metal. This deep dive was also the beginning of a breakout as shown by the Bollinger bands on the chart. The current candle remains in volatile trading, and both indicators on chart and on the Stochastic indicator are pinpointing the bears will remain in control of gold prices.
Indicated below is the beginning of a bearish trend on September 27, yet again caused by robust data. This time, US services PMI and CB consumer confidence were announced solid and positive, that led to begin a decline. A doji marked on September 23, Friday, had appeared to signal a reversal, and consequently on Tuesday, the bearish trend did start.
With little changes, shallow upticks and downbeat fundamental factors for gold, expect that the bearish momentum will still linger. Dollar may be down now on anticipation of US key data, and whether or not this data will turn out positive, Friday’s events will continue to buoy the greenback. Metals, in general, are facing erosion in their prices.
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