Commodity Market: Gold plummets to a two-month low as US Dollar extends gains against peers amid worsening risk sentiment

Spot Gold retreated for a fourth straight trading day on Thursday and touched a fresh two-month low, pressured by a stronger US Dollar amid uncertainty surrounding US fiscal and monetary stimulus measures.

The US Dollar remained firm near a two-month high against a basket of six major peers, as a second wave of infections in a number of European countries and the likelihood of another round of lockdown restrictions in Britain have bolstered its safe haven appeal this week. A stronger dollar makes Gold costlier for international investors holding other currencies.

Risk sentiment cooled after the latest data from the United States and Europe showed business activity had decelerated in September, still affected by the virus spread.

At the same time, several Federal Reserve officials strongly emphasized the need for more government fiscal support to stimulate US economic recovery from the coronavirus crisis. They also tried to convince market players that monetary policy would be kept accommodative for years in order to allow US unemployment rate to decrease.

“It seems the Fed has pretty much tied themselves into no immediate action… So, the stimulus side of this trade is looking rather bleak in the short term,” Edward Moya, a senior market analyst at OANDA, said.

As of 9:18 GMT on Thursday Spot Gold was retreating 0.67% to trade at $1,851.05 per troy ounce, after earlier touching an intraday low at $1,848.97, or a price level not seen since July 22nd ($1,841.03). The precious metal has dropped 5.78% so far in September, following a 0.42% loss in August. The commodity was also set to register its worst weekly performance since the business week ended March 13th, while being down 4.94%.

Meanwhile, Gold futures for delivery in December were losing 0.60% on the day to trade at $1,857.25 per troy ounce, while Silver futures for delivery in December were down 3.75% to trade at $22.238 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 up 0.02% on Thursday to 94.36, after earlier climbing as high as 94.49, or its strongest level since July 24th (94.83).

On today’s economic calendar, a report by the US Labor Department at 12:30 GMT today may show the number of people in the country, who filed for unemployment assistance for the first time during the business week ended September 18th, probably eased to 843,000, according to market expectations, from 860,000 in the preceding week.

A separate report by the US Census Bureau at 14:00 GMT may show new home sales dropped 1% to 0.890 million units in August.

And, also at 14:00 GMT, Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin are to testify before the Senate Banking Committee on coronavirus relief.

Near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of September 24th, 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 November 4th-5th, or unchanged compared to September 23rd.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,874.91
R1 – $1,893.98
R2 – $1,924.50
R3 – $1,943.56
R4 – $1,962.62

S1 – $1,844.39
S2 – $1,825.33
S3 – $1,794.80
S4 – $1,764.28

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