Commodity Market: Gold extends losses as US Dollar holds steady near one-week highs, Fed Chair Powell’s Jackson Hole speech in focus

Spot Gold extended losses from the previous trading day in Europe on Tuesday as the US Dollar held steady in proximity to recent over one-week highs, while market focus now turns to Fed Chair Jerome Powell’s speech at the Jackson Hole virtual symposium, scheduled on August 27th-28th, for further clues over US monetary policy outlook.

Market players are expecting a dovish tone from the Fed and are speculating that the bank may adopt a more accommodative approach in regard to inflation.

“The potential dovish shift in Fed policy should be well priced in by now which should limit further downside potential for the U.S. dollar,” Lee Hardman, currency analyst at MUFG, said.

“As the release of the latest FOMC minutes revealed, there is also some upside risk for the U.S. dollar if Chair Powell disappoints dovish market expectations in any way.”

Additionally, a report by the Financial Times that US authorities were mulling over fast-tracking approval for a COVID-19 vaccine, which is under development by AstraZeneca and Oxford University, lifted risk sentiment and weighed on the safe haven metal.

Earlier it became clear that the US Food and Drug Administration (FDA) had approved the use of blood plasma from recovered patients to treat COVID-19, a decision that was hailed by US President Donald Trump during the past weekend.

As of 9:13 GMT on Tuesday Spot Gold was edging down 0.16% to trade at $1,925.90 per troy ounce, while moving within a daily range of $1,925.03-$1,937.74. The precious metal advanced 10.95% in July, while marking its fourth consecutive month of gains and also the best monthly performance since January 2012. Yet, the commodity has retreated 2.45% so far in August.

Meanwhile, Gold futures for delivery in December were edging down 0.33% on the day to trade at $1,932.80 per troy ounce, while Silver futures for delivery in September were down 0.21% to trade at $26.550 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was inching down 0.09% on Tuesday to 93.20, while remaining not far from last Friday’s more than one-week high (93.47).

In terms of macro data, today Gold traders will be paying attention to the monthly report on US new home sales at 14:00 GMT. Sales probably rose at a monthly rate of 1.3% to 0.785 million units in July, according to market consensus.

Meanwhile, near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of August 25th, investors saw a 100.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on September 15th-16th, or unchanged compared to August 24th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,938.30
R1 – $1,952.67
R2 – $1,976.26
R3 – $1,990.63
R4 – $2,005.00

S1 – $1,914.71
S2 – $1,900.34
S3 – $1,876.75
S4 – $1,853.16