Gold is nearing a record high, with an eye on US producer inflation data

VaselineAugust 13, 2024

0 4 minutes read

Gold is nearing a record high, with an eye on US producer inflation data

Here’s what you need to know on Tuesday, August 13:

While the major currency pairs spent the first day of the week fluctuating in tight ranges, gold gained bullish momentum and climbed above $2,470. Trading action eased on Tuesday morning as investors await July US producer price index (PPI) data. During the European session, Germany’s ZEW Institute will release August economic sentiment data for Germany and the eurozone.

US Dollar PRICE Last 7 days

The table below shows the percentage change of the US dollar (USD) against the main listed currencies over the last 7 days. The US dollar was the strongest against the Japanese yen.

	USD	EURO	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.21%	-0.19%	2.56%	-0.68%	-1.55%	-1.56%	1.81%
EURO	-0.21%		-0.38%	2.34%	-0.90%	-1.78%	-1.84%	1.61%
GBP	0.19%	0.38%		2.74%	-0.50%	-1.39%	-1.45%	1.94%
JPY	-2.56%	-2.34%	-2.74%		-3.18%	-4.00%	-4.08%	-0.61%
CAD	0.68%	0.90%	0.50%	3.18%		-0.88%	-0.94%	2.46%
AUD	1.55%	1.78%	1.39%	4.00%	0.88%		-0.05%	3.39%
NZD	1.56%	1.84%	1.45%	4.08%	0.94%	0.05%		3.49%
CHF	-1.81%	-1.61%	-1.94%	0.61%	-2.46%	-3.39%	-3.49%

The heatmap shows the percentage changes of major currencies against each other. The base currency is chosen from the left column, while the quoted currency is chosen from the top row. For example, if you choose the US dollar in the left column and move along the horizontal line to the Japanese yen, the percentage change shown in the box will be USD (base)/JPY (quote).

The US dollar The index (DXY) closed largely unchanged on Monday as investors refrained from taking large positions. Wall Street’s main indexes ended the day close to the previous week’s closing levels, and the 10-year U.S. Treasury yield extended its downward correction, losing nearly 1 percent on the day. In European morning Tuesday, DXY is holding slightly above 103.00 and US stock index futures are trading marginally higher. According to The Times of Israel, the Israel Defense Forces are expecting an attack by Iran by Thursday.

Britain’s Office for National Statistics (ONS) reported on Tuesday that the IOM unemployment rate fell to 4.2% in the three months to June, from 4.4%. This reading was below market expectations of 4.5%. Other details of the UK jobs report showed that wage inflation, as measured by the change in average earnings without bonus, fell to 5.4% from 5.7% in the same period, beating analysts’ estimate of 4.6% by a wide margin. GBP/USD it gained traction after this data and was last seen trading in positive territory slightly above 1.2800. The ONS will publish July inflation data in the first European session on Wednesday.

EUR/USD posted modest gains on Monday and snapped a four-day losing streak. The pair remains relatively quiet below 1.0950 in the European morning on Tuesday.

Crude oil prices rose sharply on Monday, boosted by the ongoing conflict in the Middle East and reports suggesting Saudi Aramco is trying to cut its oil output from September. A barrel of West Texas Intermediate (WTI) rose more than 3% on Monday and hit its highest level since mid-July above $80. Early Tuesday, WTI was trading in a tight range around $79.50.

Gold benefited from the pullback in US Treasury yields and gained more than 1.5% on Monday. After rising to $2,480 during Asian trading hours on Tuesday, XAU/USD made a technical correction and was last seen trading near $2,460.

USD/JPY it posted marginal gains on Monday and continued to rise towards 148.00 in the Asian session on Tuesday.

Gold FAQ

Gold has played a key role in human history as it has been widely used as a store of value and medium of exchange. Today, apart from its luster and use for jewellery, the precious metal is widely seen as a safe haven, meaning it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies because it is not based on any particular issuer or government.

Central banks are the biggest holders of gold. In order to support their currencies in troubled times, central banks tend to diversify their reserves and buy gold to improve the perceived strength of the economy and currency. Large gold reserves can be a reliable source of a country’s solvency. Central banks added 1,136 tonnes of gold worth about $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the largest annual purchase since records began. Central banks in emerging economies such as China, India and Turkey are rapidly increasing their gold reserves.

Gold has an inverse correlation with the US dollar and US Treasuries, which are both major reserve and safe-haven assets. When the dollar depreciates, gold tends to rise, allowing investors and central banks to diversify their assets in troubled times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken the price of gold, while a sell-off in riskier markets tends to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly cause the price of gold to rise due to its safe haven status. As a lower-yielding asset, gold tends to rise with lower interest rates, while the higher cost of money usually affects the yellow metal. However, most of the moves depend on how the US dollar (USD) behaves, as the asset is valued in dollars (XAU/USD). A strong dollar tends to keep gold prices in check, while a weaker dollar is likely to push gold prices higher.

VaselineAugust 13, 2024

0 4 minutes read

US Dollar PRICE Last 7 days

Gold FAQ

Vaseline

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