After settling mostly steady on Friday, the yellow metal turned flat as most of the stock markets were closed to make up for Christmas Day falling on a weekend. On Monday session, gold prices juggled with the easing US dollar ahead of the US economic data. Will the market confidence return to the yellow metal?
Before the Christmas holiday on Friday, gold futures ended at 1133.015 with a session high of 113.80 and a session low of 1131.33. It even traded near to its 50-day SMA of 1130.79 and 20-day SMA of 1131.65. The trend was not considered bullish since it only stayed in a tight trading range for that week.
However, gold futures had increased 0.23 percent to $1133. 60 in the Commodity Exchange while Gold Spot had added 0.44 percent to $1133. 30.
While the stock markets in New Zealand, Europe, the U.K., Switzerland, Canada and the U.S. were closed, the yellow metal was flat at $1135. 00. The volatility of gold was not heightened since the US dollar was a bit challenged prior to the release of the successive US economic data.
USD/JPY ended 0.24 percent lower while USD/CAD lost 0.38 percent in Asian trading. The commodity-linked currency Australian dollar managed to keep its 0.68 percent advantage against the dollar. The US Dollar Index was down 0.12 percent to 102.95.
The sterling ended flat while the Euro declined 0.09 percent to 1.0447 against the greenback.
Due to the inverse relationship of the US dollar and the yellow metal, the upbeat US private sector data on consumer confidence and pending home sales would be a headwind for gold. In times of economic improvement, the chances of rate increases appear.
Also coming out this week is the data on weekly jobless claims, wholesale inventories and the trade deficit plus the report on manufacturing activity in the Chicago-region.
Nevertheless, the greenback doesn’t need too much lift since the Fed had indicated three probabilities of a rate hike in the coming year. The occurrence of three rate hikes will put the gold under pressure in 2017. There’s a reasonable chance the investors would be more interested in silver as a safe haven asset.
On the other hand, the Trump’s presidency may promise a turnaround for gold. The increase of fiscal spending may boost domestic demand. The uncertainties over geopolitical policies may convince the investors to put back their confidence in the yellow metal.
The discussion over the total exit of Britain from the European Union may bring market volatility as well, pointing a positive notion for gold. Back in June, the financial and foreign exchange market fluctuated after Brexit. The dilemma was extended on post-Brexit concerns, which will likely happen in 2016.
Therefore, the trend of gold will depend on the outlook of the investors in the coming year. On one hand, it may surge due to future market volatility. On the other side, the struggle may continue on US dollar appreciation. The initial reaction of the market players in 2017 will tell a lot of their focus in the entire year.
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