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Gold has lost the momentum

Nov 8 2018, 02:39 PM (+06) | Fortfs.com

The fourth day, gold closed with a negative result, this time failing to cope with the pressure of USD dollar.

The trading day started quite well, the precious metal gained significantly once again by testing the level $1235, on the background of a weaker dollar, on results of US elections to  Congress on Tuesday, but in the middle of the trading day the situation began to change radically. The election results by and large did not bring any big surprises and despite the loss of control by the Republicans in the House of Representatives, strengthening the positions in the Senate is a strong factor in balancing the positions of the two leading political parties in the United States, which indicates that the current political and economic course is likely to remain. As a result, the dollar was able to get rid of the pressure of uncertainty and by the evening of Wednesday was able to play almost all the losses to the G7 currencies, ending the trade with the result of -0.2%.

This is a strong, and now key, factor of pressure on the yellow metal, which is likely to increase its influence because today the results of the two-day FOMC meeting will be announced. Regulator will most likely keep interest rates unchanged, but may signal that they will increase next month. A signal from the Fed to further tightening monetary policy will severely limit the possibilities for further growth for gold and may cause a reversal of the medium-term price movement, as usually, such actions by the Fed lead to a stronger dollar and higher yields on US government bonds.

In addition to signals about the future change in rates, investors today will be waiting for possible comments from the FOMC about high volatility in equities, which previously also contributed to the strengthening of gold prices. Traders are primarily interested in the assessment of the current situation and the degree of possible influence of this factor on the regulator's policy. The results of the FOMC meeting will be announced today at 22:00 Moscow time.

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