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Weaker Dollar, Low Prices Help Boost Gold Futures

By:
James Hyerczyk
Published: Dec 7, 2016, 17:42 UTC

December Comex Gold futures rallied on Wednesday from a 10-month low hit earlier in the week in reaction to the weaker U.S. Dollar. The Greenback traded

gold-weekly

December Comex Gold futures rallied on Wednesday from a 10-month low hit earlier in the week in reaction to the weaker U.S. Dollar. The Greenback traded lower as investors squared positions ahead of Thursday’s European Central Bank meeting. Technically oversold prices also helped generate some aggressive counter-trend buying. However, gains were likely capped by rising U.S. equity prices.

Forex

The EUR/USD was up on Wednesday as investors pared positions in preparation for the ECB meeting. The Euro has been on the radar all week, starting with the Italian referendum on Monday. Italian Prime Minister Matteo Renzi lost in the referendum over constitutional reform.

The EUR/USD started out weaker as the results of the referendum were being released, however, it managed to recover from a 20-month low as traders shifted their focus to the ECB meeting. Traders are looking for the central bank to add more stimulus and for information as to when it may begin paring bond purchases under its quantitative easing program.

Some investors are betting on the ECB to announce an extension of the QE program beyond 2017. The Euro could rally if the central bank indicates a time limit to any QE extension.

The USD/JPY rallied early Wednesday after Bank of Japan Deputy Governor Kikuo Iwata said the Bank of Japan had not shifted its focus away from the pace of money printing.

The GBP/USD was under pressure after data showed British industrial output suffered its biggest monthly fall in more than four years. Industrial Production came in down 1.3%. The forecast called for a 0.2% gain. The last report came in at -0.4%.

The AUD/USD traded lower after data showed Australia’s economic growth fell 0.5 percent last quarter, its largest decline in eight years. The market has since recovered from the sell-off and is now trading higher for the session.

Crude Oil

January West Texas Intermediate Crude Oil fell below the psychological $50 a barrel level on Wednesday after the U.S. Energy Information Administration’s weekly report showed refineries hiked output. Rising gasoline and distillate inventories also rose.

U.S. commercial crude inventories fell by 2.4 million barrels to a total of 485.8 million barrels during the week-ending December 2. Traders were looking for a decrease of 1 million barrels.

Oil prices fell despite the greater-than-expected drawdown because of concerns over whether the production cuts promised by OPEC and Russia would cut deep enough into the oversupply.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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