Gold Steady Near Overnight Lows Amid Firm USD On Hawkish Comments From Fed Bigwigs

Gold’s price fell to 12-day lows in the overnight trade on hawkish comments from Fed Vice Chair Clarida and has since taken to range bound price action.
Colin First

Gold prices steadied on Wednesday after hitting their lowest in nearly two weeks in the previous session pressured by a robust dollar after a senior U.S. Federal Reserve official reaffirmed the need for a further increase in interest rates, making bullion more expensive for holders of other currencies. Gold’s price fell to 12-day lows in the overnight trade, signaling an end of the corrective bounce from $1,196. Gold fell to $1,212 in the overnight trade – a level last seen on Nov. 16 – as the greenback picked up a bid on hawkish comments by Fed’s Vice Chair Clarida who said the central bank should continue to gradually raise interest rates, but it was “especially important” to monitor economic data as monetary policy was getting close to a neutral stance.

Downside Move Was Capped Over Cautious Investor Stance on Fears of Trade War Escalation

Investors now focus on US Fed Chair Jerome Powell to reaffirm his stance on hawkish forward guidance for rate hikes in 2019 which could put a bid under US greenback in short term. Prospects of higher U.S. interest rates are negative for dollar-priced gold as they raise the opportunity cost of holding the bullion. However, the downside move is limited owing to cautious investor stance in global markets as Sino-U.S. trade tensions continue to escalate ahead of G20 summit while a German magazine reported citing EU sources that Trump could impose tariffs on imported cars from next week signaling the prospect of a new round of trade tariffs ahead. As of writing this article, Spot gold XAUUSD is trading at $1213.54 an ounce down by 0.12% on the day while US Gold futures GCcv1 were trading at $1212.90 an ounce down by 0.04% on the day.

Meanwhile, Spot Silver XAGUSD is trading flat at $14.15 an ounce up by 0.07% on the day. U.S. crude oil inventories posted a build of 3.45 million barrels last week, according to a report by the American Petroleum Institute (API) on Tuesday. In the previous week ending Nov. 16, API reported a draw of 1.55 million barrels, the first week that saw a draw after four weeks of straight builds. Oil prices rose by 1% on Wednesday ahead of an OPEC meeting next week at which the producer club is expected to decide some form of supply cut to counter an emerging glut.

The shutdown of Britain’s largest North Sea oilfield for repairs also supported positive price action. U.S. West Texas Intermediate (WTI) crude futures were at $52.11 per barrel at 0448 GMT, up by 1.1% from their last settlement, while International Brent crude oil futures were up by1% at $60.78 per barrel. Despite Wednesday’s rise, oil prices have still lost around 30 percent in value since early October, weighed down by an emerging supply overhang and by widespread weakness in financial markets. As of writing this article, Spot US Crude WTIUSD is currently trading at $52.31 per barrel down by 0.60% on the day.

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