Gold is the main commodity traded in the world’s market. The price of this commodity is always checked by traders and investors all the time. However, its price is still fluctuating until now. It ups and even down because of several situations happened.
The recent moment which is influencing the price of gold is for sure the speech from Powel. This important speech is also influencing other commodities and currencies in the market. That is why; you should consider it before trading.
It is also recommended to find various related references about the price of gold. The optimistic speech from Powell surprised all people. You may be not guessed that, especially in a situation amidst this pandemic. However, investors agreed that Powell was quite wise this time.
The Strengthening Condition of Gold
Gold strengthened following the sharpening of the USD sell-off and the signal from the Fed that it will extend its low-interest-rate policy. It can also be used as a means of hedging from inflation and a weakening of the currency exchange rate.
The spot price of gold rose from 1.9% to around $ 1976 per troy ounce. On the other hand, the USD weakened to its lowest level in a week. That is why; the price of gold became cheaper for investors using currencies other than USD.
Fed Chairman, Jerome Powell said last Thursday that the Fed will adopt an average inflation target, which means it will keep interest rates fixed. This action will still be done even though inflation will increase in the future. It must be appreciated.
On the other hand, the world's governments and central banks have pumped massive amounts of stimulus into the market in an effort to recover the economy from the Covid-19 outbreak. It has also helped gold gain 28% for this year's period.
Gold Price is also a Decline
Gold fell lower on the Monday period and fell to fresh daily lows. It is around the $1955-54 region in the European session market. Commodities failed to capitalize on Friday's intraday positive move and witnessed a moderate decline from the $1976-77 supply zone.
The upbeat market mood - as illustrated by the strong gains in equity markets - is seen as one of the key factors weighing on the precious metal's safe-haven status. In addition, global risk sentiment also plays an important role in this situation.
Global risk sentiment got a strong boost on the first day of the new trading week. It was following the release of better-than-expected China Manufacturing and Services PMI data for August. That release was quite surprising and it seemed that none of the investors really predict that. However, it was a good one.
The data raised expectations of a strong economic recovery from the coronavirus pandemic and boosted investor confidence. It was great for the market. Despite the risk flows, the US dollar's intraday rebound from further lows exerts some pressure on dollar-denominated commodities.
Major Policy Change from the Fed
However, last week's dovish signal from the Fed may hold back USD bulls from placing aggressive bets. It also helps limit deeper losses for the yellow metal that was not yielding. Fed Chair Jerome Powell said it in the Jackson Hole Symposium.
He announced a major policy change and said the US central bank was willing to let inflation run hotter than usual. The Fed has prioritized jobs over inflation, suggesting that interest rates can stay lower for longer.
This makes it wise to wait for some strong selling follow-up before traders again start positioning. It is for an extension of its recent sharp correction from record highs, set for Aug.7. The sustained strength outside the $1976-77 supply zone will set the stage for a move back.
