Gold continues to fall in price for the fifth consecutive day amid a change in the fundamental background from moderately positive to moderately negative sentiment.
Earlier, the yellow metal received strong support due to the local weakening of the dollar, the growth of geopolitical risks and the growth of volatility and uncertainty in equities. Now almost all of these factors play against gold, the situation on the stock markets has stabilized somewhat, the dollar is once again strengthening after a small correction, and only the remaining geopolitical risks provide moderate support to the precious metal.
Yesterday, all investors' attention was forwarded primarily to the FOMC meeting and the dollar's reaction to this event. The American currency, getting rid of the pressure of uncertainty associated with the past mid-term elections to the US Congress, strengthened throughout the day as most investors still look with optimism at the prospects for maintaining current US monetary policy. The decision of the regulator fully met the expectations. The cover letter noted that the US economy is still in good condition, the inflation rate remains near the target level of 2%, while inflationary expectations have not changed, which allows to continue the process of gradually increasing interest rates to the pre-crisis level. Of course, this is a serious long-term pressure factor for gold, since Fed monetary policy, firstly, provides serious support to the dollar, which makes gold a more expensive asset, and secondly, leads to an increase in the yield of US Treasury bonds, which gold loses in the question investment attractiveness.
Buyers of the yellow metal can now rely only on the continuing tense situation in geopolitics, as well as the ambiguous situation in equities, but the question is whether these factors are able to fully compensate for the pressure of the dollar?
Today, in addition to geopolitical news, one should pay attention to a very large block of important statistics from the UK, which may indirectly affect the dynamics of the dollar index. In the US, among the most important data the producer price index is focused - one of the leading indicators of consumer inflation. The indicator is expected to remain at the level of last month at 0.2%.