Gold prices were volatile this week with new sellers emerging as the metal had trouble getting off the $3,385 area. Gold prices reached a multi-week high on Tuesday. They’ve since given back many of those gains thanks to financially arcane whipsaw in the financial markets.
On Tuesday, gold prices soared to a significant high point, but soon ran out of steam as traders took profits. We interpret the recent price action to mean that gold is still under pressure, with the dollar modestly strong continuing to provide pressure on gold. As of Thursday, market analysts noted that “Gold price remains depressed amid modest USD strength; bullish potential seems intact” according to FXStreet.
At the same time, which was interesting, the currency markets were getting very volatile. One” The USD/JPY currency pair has found renewed strength so far earlier this week after making a low just below 142.50. On Thursday in Asian trading, it finally did break back above the 143.00 level convincingly. The USD/JPY is up for a third day in a row. This increase was influenced by a recent report indicating Japan’s real wages declined for the fourth consecutive month. The drop in nominal wages will add to fears over further rate cuts from the Bank of Japan (BoJ).
“USD/JPY picks up bids to retake 143.00 after Japanese Wages data,” FXStreet reported, highlighting the impact of economic indicators on currency movements.
Meanwhile, the GBP/USD currency pair struggled and reversed sharply toward the 1.3550 area. Market analysts observed that the US Dollar is back on top. This latter, foot-stamping demand comes as a reaction to the reality of the continuing realignment of the market.
“GBP/USD reverses to near 1.3550 as US Dollar finds fresh demand,” emphasized FXStreet, underscoring the broader implications of USD strength on other major currencies.
Expectations for new trade agreements between the United States and Canada, and between the EU and the U.S., are increasing sharply. This unabashed optimism has provided a highly supportive environment for the US Dollar. Traders have been positioning accordingly leading up to Friday’s key Non-Farm Payroll (NFP) data release. This critical economic barometer sometimes moves the markets quite drastically depending on what’s expected.
The dynamic between each of these factors paints a messy picture for both gold and dollar traders. Gold prices are under pressure from a strong dollar. At the same time, yen and pound troubles point to a new economic landscape where powerful indicators shape and exchange fortunes for the dollar.