Corona Virus
Stay Safe, FollowGuidance
Fetching Location Data…
James Hyerczyk
Gold Bars and Dollar

After consolidating for four sessions while straddling last year’s closing price at $1294.20, gold prices are spiking higher on Monday in reaction to a drop in the U.S. Dollar. The catalyst behind the move is risk aversion, fueled by a decline in global equity markets.

Traders can’t pinpoint the exact reason for the shedding of risky assets. Most traders agree the selling pressure in the financial markets is being fueled by one or more of the following factors:  Brexit concerns, worries over a global economic slowdown, uncertainty over U.S.-China trade relations, and profit-taking ahead of the start of U.S. earnings season on Friday.

Know where Gold is headed? Take advantage now with 

75% of retail CFD investors lose money

At 08:39 GMT, June Comex gold is trading $1301.40, up $5.80 or +0.45%.

Traders should also note that the U.S. Dollar appears to have lost its luster as a safe-haven asset, at least temporarily. Money appears to be leaving the stock market and entering traditional safe-haven assets such as gold, Treasurys and the Japanese Yen.

U.S. Non-Farm Payrolls Report

The internals of the U.S. Non-Farm Payrolls report may be exerting the most negative pressure on the dollar today as well as demand for higher risk assets. The headline number was bearish for gold, but weaker-than-expected average hourly earnings suggests the Fed may have been right in turning dovish on policy at its last meeting. Furthermore, traders are saying that despite the economy adding 196K jobs in March and February’s payroll being jacked up to 33,000 jobs from 20,000 jobs, positions were lost in manufacturing, which could be a bad signal for the sector.


Other News

According to the Commodity Futures Trading Commission (CFTC), hedge funds and money managers slashed their bullish wagers in COMEX gold in the week to April 2.

Additionally, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, also fell as much as 3 percent in the previous week, its biggest weekly percentage decline since the end of November 2016.

Daily Forecast

The current rally in gold, whether it be short-covering or fresh speculative buying, may last until Wednesday’s release of the minutes from the Fed’s last monetary policy meeting. Gains may even be extended beyond that if the minutes reveal a more dovish central bank.

It’s also interesting to note the liquidation taking place in the gold market. The futures showed hedge funds and money managers reducing positions. While in the cash market, individual investors sold gold. We’ll be watching to see if this represents the start of another leg down in the market, or it was a play to shake out some of the weaker longs before a new rally begins.

As for the rest of the session on Monday, the direction of gold will likely be dictated by the direction of the U.S. Dollar and investor appetite for risk. The best scenario for bullish gold traders will be a weaker dollar and a plunge in equity prices.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker

  • Your capital is at risk
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.