Commodity Market: Gold retreats pressured by firmer dollar, market focus sets on central bank policy meetings

Spot Gold was stuck within a tight trading range in Europe on Wednesday, as the US Dollar remained firm near a fresh one-month high against a basket of major peers, while market players awaited policy decisions by Bank of Canada and the European Central Bank later in the week.

“Traders in Asia will adopt a cautious tone, preferring to wait for New York to open and clearer evidence as to whether the USD rally and stock market sell-off will continue,” Jeffrey Halley, a senior market analyst at OANDA, said.

“However, a deeper correction below $1,900 cannot be ruled out if the dollar stays strong.”

Earlier the yellow metal received certain support as Asian equities retreated on Wednesday following a selloff in US shares on Tuesday.

Market focus now sets on the outcome of the ECB’s policy meeting on Thursday. The central bank is expected to keep its policy stance unchanged, while investors are anticipating an update on inflation and the bank’s view about the Euro’s recent strength. Gold is largely regarded as a hedge against inflation.

At the same time, Bank of Canada is scheduled to set policy later today.

As of 8:48 GMT on Wednesday Spot Gold was edging down 0.11% to trade at $1,929.63 per troy ounce, while moving within a daily range of $1,923.16-$1,934.42. The precious metal has retreated 1.88% so far in September, following a 0.42% loss in August.

Meanwhile, Gold futures for delivery in December were edging down 0.24% on the day to trade at $1,938.45 per troy ounce, while Silver futures for delivery in December were down 0.37% to trade at $26.890 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 0.01% on Wednesday to 93.51, after earlier climbing as high as 93.62, or its strongest level since August 12th (93.91).

In terms of macro data, the number of job openings in the United States probably increased to 6.0 million in July, according to market expectations, from 5.889 million in June, an official report may show at 14:00 GMT today.

Meanwhile, near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of September 9th, 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 September 8th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,926.39
R1 – $1,946.16
R2 – $1,960.62
R3 – $1,980.39
R4 – $2,000.15

S1 – $1,911.93
S2 – $1,892.16
S3 – $1,877.70
S4 – $1,863.24

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