In the short run, gold prices have been met with new selling interest, especially near the $3,385 area. On Tuesday, the precious metal hit a multi-week high. Since then it has dropped, erasing most of the modest gains made in earlier sessions. Traders are still unwinding their positions as they try to react to the changing dynamics. Meanwhile, all eyes are on the critical US Non-Farm Payroll (NFP) data due Friday.
The US Dollar has seen considerable renewed demand and this further stepped on demand for gold prices. Similarly, the GBP/USD exchange rate pulled back to around 1.3550 on this strength in the US Dollar. Many analysts say that it’s the dollar’s rapid resurgence that’s causing the plunge in value of other currencies. That very much includes the British Pound and Japanese Yen.
On Monday, gold prices shot up to their highest level in more than a year. They did not carry that initial momentum as the dollar’s grip continued to grow. As the market reflects on the dollar’s modest uptick, it remains crucial to monitor how this will impact gold’s standing in the coming days.
“Gold price remains depressed amid modest USD strength; bullish potential seems intact.” – FXStreet
The USD/JPY currency pair has remained resilient, holding on to gains above the 143.00 level. The dollar’s value has increased as the likely success of trade deals between the US and Canada, and the US and the EU grow more hopeful. Combined with all of this positive news, it’s creating confidence in the currency.
With traders adjusting their positions ahead of Friday’s NFP release, movement in the markets should continue to be choppy. Analysts are split on gold’s prospects. They do concede the current headwinds but factors suggest the precious metal remains in very bullish territory.
Beyond just movements in the price of gold and the value of the dollar, it’s important to look at the overall market. The dollar’s rise, largely fueled by the recent optimism surrounding a potential US-China trade deal, has put added pressure on gold’s performance.
It should be no secret that the Japanese Yen is feeling pressure in this environment, just like it is against its counterparts – depressed. Market participants continue to closely watch these developments as they are paving the way for new trading strategies.
“GBP/USD reverses to near 1.3550 as US Dollar finds fresh demand.” – FXStreet