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Commodity Market: Gold heads for best week since late August as dollar keeps pulling back from one-year highs

Spot Gold was poised to register its biggest weekly gain since late August, as the US Dollar continued pulling back from the recent one-year peak, making the commodity more attractive for international investors holding other currencies.

However, a sharp increase in 10-year US Treasury yields so far in October has capped Gold’s upside, as it resulted in a higher opportunity cost of holding the precious metal which pays no interest.

“While gold continues to trace out a series of higher lows and appears to be girding itself for another test of $1,800, it could struggle to maintain momentum above $1,800,” Jeffrey Halley, senior market analyst for Asia-Pacific at OANDA, was quoted as saying by Reuters.

“When gold stages powerful rallies these days, much of the flow seems to be dominated by momentum-seeking fast money. Unfortunately for gold, that money heads for the exit door at the first sign of trouble,” he added.

Earlier this week the Fed President for Atlanta Raphael Bostic said that he expected high inflation to be still present in 2022 and that the central bank should lift borrowing costs by the end of next year.

“The global economy is going to be very stable given robust household consumption and strong corporate earnings and in such a backdrop, I don’t see gold doing well in the longer-term,” Hitesh Jain, lead analyst at Yes Securities, said.

As of 8:35 GMT on Friday Spot Gold was advancing 0.53% to trade at $1,792.14 per troy ounce, while moving within a daily range of $1,782.43-$1,794.58 per troy ounce.

The commodity looked set to register its best performance since the business week ended August 27th, while being up 1.38%. The precious metal has gained 2.10% so far in October, following a 3.13% loss in September.

Meanwhile, Gold futures for delivery in December were gaining 0.60% on the day to trade at $1,792.65 per troy ounce, while Silver futures for delivery in December were up 1.03% to trade at $24.418 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging down 0.14% to 93.627 on Friday. The DXY extended a pullback from the October 12th high of 94.561, also a more than one-year high.

Near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of October 22nd, 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 2nd-3rd, or unchanged compared to October 21st.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,782.82
R1 – $1,789.27
R2 – $1,795.79
R3 – $1,802.24
R4 – $1,808.68

S1 – $1,776.30
S2 – $1,769.85
S3 – $1,763.33
S4 – $1,756.80

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