Gold prices resumed their decline on Wednesday, falling to around $3,315 in the early Asian session. With gold continuing its daily retreat, it is fast approaching the important level of $3,310. Today traders are monitoring this closely as we head toward some critical economic data out of the United States.
Gold has floated lower as the market waits for crucial data that may guide monetary policy going forward – a reflection of investor uncertainty. Gold prices are on the move, drawing headlines and scrutiny from so many. These timing changes are usually driven by what investors want to see as economic conditions evolve.
At the same time, as gold was slipping downwards, the Australian dollar (AUD) put on an impressive performance. It drew in new speculative bids and rose back within the 0.6400 handle during the Asian trading session. The increase came on the heels of hotter than expected quarterly inflation data released in Australia. This information had a huge effect on shaping the market’s expectations about future interest rate moves by the Reserve Bank of Australia (RBA).
The surprise jump in Australian inflation has snuffed out hopes for any soon-to-come cuts in the RBA’s cash rate. Consequently, the AUD/USD currency pair skyrocketed above 0.6400, signaling a strong return of spirits toward the Australian economy. Traders rejoiced at this positive economic indicator, which points to a more robust outlook on consumer inflation and a pickup in broader economic activity.
The recent divergence between gold prices and the Australian dollar illustrates the intricate relationship between commodity markets and currency markets. Gold functions as a refuge asset in times of crisis. National currencies can swing widely based on local financial statistics.