Gold prices ended the U.S. day session moderately higher Thursday, supported by a lower U.S. dollar index and higher crude oil prices. December Comex gold was last up $8.00 an ounce at $1,357.00. September Comex silver was last up $0.102 at $19.75 an ounce.
The marketplace is focused on the slumping U.S. dollar index, which hit a seven-week low overnight. The weakening greenback is a bullish element for the raw commodity sector. Most major raw commodities on the world marketplace are priced in U.S. dollars. When the dollar depreciates against the other currencies, it makes commodities cheaper to purchase with non-U.S. currency.
It’s best to start with U.S. dollar weakness today because it has affected most other markets. The greenback is down against the euro, yen, British pound and Swiss franc. The dollar is sliding because of a thousand small cuts to its strength rather than some large crisis of confidence.
It is at a nearly eight-week low against the euro mainly because analysts are seeing a continuing diminishing chance of a Federal Reserve rate hike. Whether the experts are right or not is immaterial for the nonce. The market reads, then the market acts.
The lower buck is very good for gold. It is higher by about $3.50 at 4PM in New York solely on the back of dollar weakness. A lower dollar means higher gold prices. In fact, regular trading is tugging gold in a downward direction but without much success.
HSBC looks for U.S. dollar weakness and says this should be supportive for gold. The greenback will be a key determiner of gold direction, and the dollar in turn will be influenced by Fed monetary policy, HSBC say. The HSBC foreign-exchange team looks for the dollar to weaken as the Fed debate takes on an increasingly dovish tone in the run-up to the Jackson Hole economic symposium on Aug. 26. At this event, markets will be focused on the tone of Fed Chair Janet Yellen’s speech. While minutes of the last Fed meeting show a lively debate about the appropriate pace of tightening, if Yellen’s speech dwells on the issue of a progressively lower natural interest rate, then the dollar will likely continue to weaken, according to the FX team. “This would be positive for gold,” HSBC says.
Reference: Kitco
Thai
Eng