Commodity Market: Gold gains after sharpest monthly drop since November 2016 on weaker dollar, US fiscal stimulus optimism

Having registered its steepest monthly slump since November 2016 in September, Spot Gold rebounded on Thursday, supported by a weaker dollar and optimism over new fiscal stimulus package in the United States.

US Treasury Secretary Steven Mnuchin said on Wednesday that negotiations with House Speaker Nancy Pelosi had “made a lot of progress” on the coronavirus aid bill, but still, no deal has been reached. On the other hand, Democrats and the White House reached common ground on matters such as direct payments, small business loans and airline aid, Mnuchin told Fox Business News.

“There’s a bit of relief that the dollar rally has for the most part ended and it seems many investors are more so focused on the headwinds ahead of the global economic recovery,” Edward Moya, a senior market analyst at OANDA, said.

The US Dollar eased to a fresh one-week low against a basket of six major peers, as a string of macro data indicated US economic recovery was on track. Data showed US private sector companies had hired more employees in September than expected, while manufacturing activity in Chicago area expanded at the sharpest rate since February 2019 last month.

A softer US Dollar makes Gold more appealing to international investors holding other currencies.

As of 9:12 GMT on Thursday Spot Gold was gaining 0.54% to trade at $1,895.68 per troy ounce, while moving within a daily range of $1,884.72-$1,900.39 per troy ounce.

Meanwhile, Gold futures for delivery in December were edging up 0.25% on the day to trade at $1,900.25 per troy ounce, while Silver futures for delivery in December were up 0.78% to trade at $23.677 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was little changed at 93.82 on Thursday, after earlier slipping as low as 93.62, or its weakest level since September 22nd (93.47).

In terms of macro data, today Gold traders will be paying attention to US reports on initial jobless claims, PCE inflation and manufacturing activity.

Near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of October 1st, 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 30th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,889.79
R1 – $1,898.06
R2 – $1,910.62
R3 – $1,918.88
R4 – $1,927.15

S1 – $1,877.23
S2 – $1,868.97
S3 – $1,856.41
S4 – $1,843.85

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