Underlying gold prices had a negative bias this week, underscoring worries about the economic outlook and strength of the dollar. Prices did hit a four-week high before retreating to settle even lower. A modest bounce back from the day’s lows eased some of the pain for investors. Gold prices fluctuated in reaction to major developments in the foreign exchange market. This was particularly the case for the British pound and Australian dollar.
Falling gold prices in the past trading session below this local peak are a sign that demand is weakening. Echoing bearish sentiment, analysts last week said the bearish sentiment has been driven largely by ongoing economic uncertainty and weakness from fluctuating currency values. The precious metal’s failure to continue the run has caused most investors to remain on guard.
At the same time, the GBP/USD forex pair attempted to test the important level of 1.3500 but stayed slightly below, carrying a bearish sentiment. Anxiety about the impact of UK economic data releases has added to this trend. Traders continue to look for more signs to further drive the pound’s performance against the dollar. The persistent pressure on GBP/USD signals a cautious outlook among investors, who are closely monitoring developments for potential shifts in strategy.
In like manner, the AUD/USD cross reversed course, running down toward 0.6450. A number of factors played a role in this sharp decline. Subdued inflation, coupled with the release of the Reserve Bank of Australia’s (RBA) minutes showing a dovish bias in future monetary policy, has seen rates tumble. Additionally, China’s May Caixin Manufacturing Purchasing Managers’ Index (PMI) contracted unexpectedly, raising concerns about global demand and economic stability. The net effect of these factors has been downward pressure on the Australian dollar.
The USD had a goodish rebound against its peers, helped by haven flows in another tumultuous week for markets. Increasing concern with respect to global economic growth is propelling this rebound. Further, inflationary pressures have arisen in the past few months. Investors are rushing to the dollar as a safe haven. This ravenous demand has pushed the dollar up against a range of other currencies further complicating the outlook for everyone else.