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Gold Hits 1-Week High as Trump’s Comment Drags down US Greenback

By:
Colin First
Updated: Aug 21, 2018, 10:54 UTC

Trump's comment on Fed rate decision weighed down USD giving precious metals an opportunity to move up. Any further move in near future could be dictated by various geo-political events that affect key global markets.

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Gold prices on Tuesday climbed to a one-week high on the back of a weaker dollar after U.S. President Donald Trump said he was “not thrilled” with the Federal Reserve for raising interest rates. As of writing this article spot gold XAUUSD rose 0.42% to $1,195.45 an ounce, after touching $1,196.27 earlier the highest level since Aug. 14, While U.S. gold futures GCcv1 climbed 0.5% to $1,200.60 an ounce.

The dollar sagged against major peers and the yen on Tuesday after Trump, in an interview with Reuters, criticized Fed Chair Jerome Powell – his own appointee – for raising interest rates. This situation has provided Spot gold strength in the global market after a brief stretch of time. Gold is expected to continue moving higher during today’s trading session as DXY – the dollar index which measures the strength of US dollar against six major currencies is expected to continue its downward movement.

Investors Primary Focus  Remains on Geo-Political Events as Progress on Any Event Could Affect Precious Metals Price Action

Gold is highly sensitive to rising U.S. rates as it increases the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced. The U.S. central bank has raised rates twice this year and targets two more hikes, with the next one slated in September. However, Atlanta Fed President Raphael Bostic said on Monday he was maintaining his expectation for one more interest rate hike this year.

Investors looked ahead to the release of the Fed’s August meeting minutes on Wednesday and the bank’s annual policy symposium at Jackson Hole, Wyoming later this week. Markets were also focused on a U.S.-China trade meeting this week, but Trump on Monday said he did not expect much progress from talks with Beijing. The outcome of Sino-U.S trade-related talks could give precious metals market some volatility during this week’s market hours. Spot silver XAGUSD is currently trading at $14.834 an ounce, up 0.54% on the day.

Oil prices seemed to have leveled off after seven consecutive weeks of weekly declines, the longest streak in years. But the next steps are unclear. In the battle over the market narrative, concerns about the health of the global economy are up against the potential for serious supply outages in Iran. The fears about the global economy have moved to the front burner in recent weeks. The trade war between the U.S. and China still threatens to drag down global growth but the talks at least increase the odds, however slightly, that the proposed $200 billion in U.S. tariffs on Chinese goods do not go forward while possible hitting about China’s stance on the import of US Crude. While multiple global events affect the price action of Crude oil overall outlook for Crude remains bearish. As of writing this article, WTIUSD is trading at 66.25/b down 0.09% on the day.

About the Author

Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.

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