🔮 Better than the Oracle? Our Fair Value found this +42% bagger 5 months before Buffett bought itRead More

Gold Prices Drop as Dollar Strengthens; Sterling Rises, AUD Dips on RBA Rate Hikes

Published 11/07/2023, 04:50 AM
Updated 02/20/2024, 03:00 AM
GBP/USD
-
AUD/USD
-
XAU/USD
-
DX
-
GC
-
DXY
-

Gold Prices Dip as Dollar Strengthens and Safe-Saven Demand Wanes

Gold (XAU) price dropped by 0.73% on Monday amid a strengthening dollar and a decline in demand for safe-haven assets.

The Dollar Index (DXY) climbed by 0.2% following its drop to a six-week trough in the prior session, consequently increasing the cost of gold for holders of other currencies. Currently, the narrative is still centred on geopolitical risks. However, there appears to be a slight reduction in these risks as far as gold is concerned, and this is being mirrored in the pricing. Prime Minister Benjamin Netanyahu indicated that Israel might contemplate brief strategic halts in the conflict in Gaza to allow aid delivery or hostages' release, yet he reiterated his refusal of a broad ceasefire despite mounting global calls for peace. Investor sentiment is tilting towards the possibility that the Federal Reserve has concluded its cycle of rate increases, bolstered by last week’s tepid U.S. non-farm payrolls data for October. Yet, the President of the Federal Reserve Bank of Minneapolis, Neel Kashkari, has indicated that further efforts may be necessary to rein in inflation.

XAU/USD was declining during the Asian and early European trading sessions. Today, investors will likely continue closely monitoring the developments in the Middle East. Should the conflict reignite, gold prices might rebound to the $2,000 mark or higher.

Sterling Rises Amid Weakening Dollar

Sterling advanced on Monday, building on last week's gains, pressured by falling US bond yields that weakened the dollar. However, its rise was tempered after a survey indicated a continuing contraction in the U.K. construction sector in October due to increased borrowing costs impacting house builders.

The US Dollar Index, measuring the greenback against a basket of major currencies, fell 1.4% the previous week following the Federal Reserve's decision to pause interest rate hikes and signs of a potential slowdown in the U.S. economy. On Monday, the index saw an additional decline of 0.13%. In recent months, soaring U.S. bond yields, spurred by a robust American economy, have driven financial markets. However, expectations of a possible interest rate cut by the Fed, coupled with softer U.S. data, have recently lowered global bond yields, boosting stocks and non-dollar currencies. Meanwhile, the Bank of England maintained its interest rate at a 15-year peak of 5.25% amidst concerns over the U.K.'s economic outlook.

GBP/USD was declining during the Asian and early European session. If the British pound rebounds from the 1.2310 level, continues its upward trajectory, and breaks through the resistance of 1.2450, it could trigger increased buying activity.

The AUD Declined Even Though the RBA Raised Interest Rates.

The Australian dollar (AUD) dropped by approximately 0.9% to $0.6430 on a 'dovish hike' at the Reserve Bank of Australia (RBA).

The Australian dollar saw significant movement in the foreign exchange market, dropping following the Reserve Bank of Australia's expected 25 basis point rate increase, which pushed the cash rate to its highest level in 12 years at 4.35%. However, the central bank moderated its tone regarding the need for additional measures. Markets had previously anticipated a 70% likelihood of a rate increase this week, which was in line with most analyst predictions. However, following recent developments, futures markets have reduced the probability of another rate hike in December to about 30%. Additionally, there's now a slight expectation of a rate cut late next year, a scenario that had not been considered likely before.

AUD/USD was falling during the Asian and early European sessions. There won't be any major announcements today to cause fresh intense fluctuations in the AUD/USD pair, yet the market will still feel the impact of past developments and will adjust the exchange rate based on the latest information.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.