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Gold market is retreating from 1200 level as bulls quit longs amid stronger USD dollar

Aug 23 2018, 01:54 PM (+06) | Fortfs.com

On Wednesday, a three-day corrective growth was completed. Gold bulls tried to develop a correction further, but US dollar returned to growth in the middle of US trading session, which put pressure on the precious metal quotes and turned the market down. Therefore, the psychological 1200 level was just tested and what is more important is that market did not even try to seriously break through it.

Today, gold continues to trade in negative territory with a decline of -0.4%. FOMC minutes were published last night and protocols confirmed the Fed's intention to raise the interest rate at the September meeting if the economic indicators meet the regulator's expectations. An important point is also that at the meeting officials discussed the issue of excluding the phrase "soft monetary policy" from the final statement, which implies stimulating the economy. Earlier, Jerome Powell has already noted that such a definition has lost its relevance, since interest rates in the country are approaching a neutral level, at which economic stimulation is no longer happening.

Of the negative aspects of the protocols, it is worth noting the concerns expressed by the officials about the ongoing trade wars that could harm the American economy. But in general, traders appreciated the protocols positively, which is confirmed by the current growth in the dollar index, which added about 0.3% from the beginning of the day, putting pressure on the entire precious metals market, in addition to gold, silver is currently traded at -0.8% and platinum -0.85%.

Gold still very much depends on the vector of movement on the dollar index and because there is a fairly high probability that the dollar index will resume upward movement the gold is likely to again be under pressure and change the direction of its movement back to decline.

It should be noted that, in addition to published FOMC protocols, there is a number of other topics on the market that will be closely watched today. The focus of attention is still upon the trade conflict between Washington and Beijing, intrigue is growing, as United States has held the second stage of increasing duties on China's goods, while negotiations are underway between the parties. No particular news was announced so far on the issue.

Earlier, the Chinese side, represented by the representative of the Ministry of Foreign Affairs, expressed hope for the resolution of the conflict, while Donald Trump stated that he did not expect a big breakthrough in the negotiations.

Today market focus will be upon starting symposium in Jackson-Hole, where high ranking officials of many financial institutions will meet to discuss the state of world financial system. Jerome Powell is expected to give a speech on Friday.

There is another driver for the markets which is able to influence USD dollar and US equity markets as well. The news broke on the next domestic political scandal associated with the Donald Trump. This time, the charges came from the former head of Trump's campaign headquarters and his lawyer.

Besides the moderate impact on the trading session can trigger Thursday statistical unit. The main attention will be upon the data on US housing sales.

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