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Monetary hawks help dollar push down gold

The gold price has moved down as a hawkish sentiment arose from the European Central Bank’s forum in Portugal. Spot gold fell 0.2% to $1,242.56 as of 0736 GMT; US gold futures for August were down 0.3% at $1,242.60.

Comments from leaders of top monetary institutions such as European Central
Bank head Mario Draghi, Bank of England governor Mark Carney, and top policymakers at the Bank of Canada all indicated a transition away from quantitative easing and towards a higher-interest economy.

The dollar index, which values the greenback against other currencies, has started to look more robust, up 0.1% after hitting a nine-month low at 95.470 on Friday. This is likely to be of interest to investors as higher interest rates are usually dollar-supportive, and often depress the gold price in the short run as gold offers no yield.

Previously we had commented that the dollar was currently driving the gold price, but that it was a weak relationship and could be overridden at a moment’s notice. The Federal Reserve has indicated that it was going to hike rates, the timing and pacing the variable up for debate.

“Central banks worldwide are going to have some kind of less stimulative economic policies. About the pace of their exit strategies, the only question is regarding the matter of degree and not the direction itself,” said Mark To, head of research at Hong Kong’s Wing Fung Financial Group, to Reuters.

The gold price often falls into different “ranges”, whereby it will float around in different price brackets. However a price shock caused by a considerable event can “push” past the resistance points into a new price range.

Gold has been range-bound between $1,243-$1,248, and nothing has pushed it far enough to change that at the moment, MKS PAMP analyst Tim Brown said in a note to Reuters. “Central banks seem to be moving toward a more hawkish view and the resulting rise in the bond yield curve is putting downward pressure on gold prices.”

Photo: Mario Draghi at the ECB Forum in Portugal. Credit: European Central Bank, under CC BY-NC-ND 2.0

 

Link to this article: : http://www.goldmadesimplenews.com/gold/monetary-hawks-help-dollar-push-down-gold-13252/

Posted by on Jun 30 2017. Filed under Gold News, Markets. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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