Strong Dollar Puts Gold and Oil in Check
Gold and oil prices have been affected by the uncertainty surrounding U.S. interest rates, as markets anticipate the Federal Reserve's (Fed) next moves and inflation data. These expectations have generated volatility in both assets, with specific factors impacting their trends.
Gold: Fed and Interest Rate Uncertainty
Gold has seen a decline in Asian markets, extending its downtrend from recent record highs reached earlier in the month. Investors are reassessing their expectations for Fed policy, now forecasting a minor cut of only 25 basis points in November. This projection has reduced the appeal of gold, traditionally seen as a safe haven in times of uncertainty.
Gold (Ticker AT: GOLD): settled at $2,615.90 per ounce, down -1.82%. The September 26 highs of $2,685.43 have been fading, the Checkpoint is in the $2,503.99 zone, the RSI does not look excessively overbought at 56.20% so it is likely that the extension as we indicated previous weeks could reach $2,700.
In addition, upcoming U.S. inflation data due on Thursday could influence the Fed's decisions. A lower interest rate cut or tame inflation could continue to pressure gold prices, as these conditions make the metal less attractive against yielding assets.
Oil: Inflation and Economic Outlook
In the oil market, prices have also felt pressure, largely due to uncertainty surrounding U.S. monetary policy and global economic signals. Expectations that the Fed will be cautious with its rate cuts have kept the value of crude oil under watch.
West Texas Index crude oil prices (Ticker AT: Lcrude): Investors are closely watching the Fed's next moves as a higher rate environment could dampen global oil demand. Oil's long-term bearish shift, sliding the price since October 1 to the upside with a correction yesterday that closed the stock around $73 it would not be unusual to see a continuation of the price towards $80 at the top of the channel.
Globally, the lack of additional stimulus measures in China has further discouraged commodity investors, increasing pressure on crude oil prices.
Additional Pressure: The Strength of the U.S. Dollar
The strength of the dollar has been a critical factor affecting both gold and oil. A stronger dollar makes commodities denominated in this currency more expensive for international buyers, which tends to depress demand and thus prices.
Dollar index (AT Ticker: USDIndDec24): Up 0.11%, approaching a seven-week high.
The strengthening of the dollar, coupled with rising Treasury yields, has reduced the attractiveness of assets such as gold and oil, which are sensitive to US currency movements. This dynamic will continue to be a key factor in the evolution of these markets in the short term.
Ion Jauregui - ActivTrades Analyst
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
Gold: Fed and Interest Rate Uncertainty
Gold has seen a decline in Asian markets, extending its downtrend from recent record highs reached earlier in the month. Investors are reassessing their expectations for Fed policy, now forecasting a minor cut of only 25 basis points in November. This projection has reduced the appeal of gold, traditionally seen as a safe haven in times of uncertainty.
Gold (Ticker AT: GOLD): settled at $2,615.90 per ounce, down -1.82%. The September 26 highs of $2,685.43 have been fading, the Checkpoint is in the $2,503.99 zone, the RSI does not look excessively overbought at 56.20% so it is likely that the extension as we indicated previous weeks could reach $2,700.
In addition, upcoming U.S. inflation data due on Thursday could influence the Fed's decisions. A lower interest rate cut or tame inflation could continue to pressure gold prices, as these conditions make the metal less attractive against yielding assets.
Oil: Inflation and Economic Outlook
In the oil market, prices have also felt pressure, largely due to uncertainty surrounding U.S. monetary policy and global economic signals. Expectations that the Fed will be cautious with its rate cuts have kept the value of crude oil under watch.
West Texas Index crude oil prices (Ticker AT: Lcrude): Investors are closely watching the Fed's next moves as a higher rate environment could dampen global oil demand. Oil's long-term bearish shift, sliding the price since October 1 to the upside with a correction yesterday that closed the stock around $73 it would not be unusual to see a continuation of the price towards $80 at the top of the channel.
Globally, the lack of additional stimulus measures in China has further discouraged commodity investors, increasing pressure on crude oil prices.
Additional Pressure: The Strength of the U.S. Dollar
The strength of the dollar has been a critical factor affecting both gold and oil. A stronger dollar makes commodities denominated in this currency more expensive for international buyers, which tends to depress demand and thus prices.
Dollar index (AT Ticker: USDIndDec24): Up 0.11%, approaching a seven-week high.
The strengthening of the dollar, coupled with rising Treasury yields, has reduced the attractiveness of assets such as gold and oil, which are sensitive to US currency movements. This dynamic will continue to be a key factor in the evolution of these markets in the short term.
Ion Jauregui - ActivTrades Analyst
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.