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U.S dollar un against gold prices

Gold Falls & Indices Rise as Markets Continued to Digest Fed’s Announcement, BOE Lowers Growth Outlook & Oil Prices reach 2-month High

Gold falls, Indices rise as Fed ready to hike rates

Gold prices were trading lower on Thursday, with the S&P 500 and NASDAQ higher, as markets continued to digest yesterday’s Fed announcement.

The Federal Reserve began by confirming it would keep interest rates unchanged, whilst telling markets it would begin to taper its asset purchasing programme, by as earlier as November.

Fed chair Powell stated that this could begin, as long as September’s payroll report is “reasonably strong”.

Why did gold prices drop, if indices went up?
The price of gold is generally inversely related to the value of the United States dollar because the metal is dollar-denominated. All else being equal, a stronger U.S. dollar tends to keep the price of gold lower and more controlled

It was also noted that Inflation is now expected to be above the Fed’s target for 4-years, leading to the central bank to potentially hike rates in 2022.

As of writing XAUUSD hit an intraday low of $1,745, with the S&P 500 trading 1.27% higher.

Bank of England lowers growth outlook

It was “Super Thursday ” in the United Kingdom, with the Bank of England holding its own monetary policy meeting.

Like the Fed, the BOE also opted to keep interest rates unchanged, whilst also maintaining its asset purchasing target at £875 billion.

The bank also confirmed that it was revising the country’s growth forecast for the year to 2.1%, down from 2.9%.

Many believe this was a direct result of the Delta variant, which mildly impacted consumer spending in recent months.

How the Delta Variant affected consumer spending
When consumers open their pocketbooks, the economy tends to hum along. Retail shelves empty and orders are placed for replacement merchandise. Plants make more widgets and order raw material for even more.

However, if consumers feel uncertain about their financial future (or health) and decide to hold off going out and buying new refrigerators or blue jeans, the economy slows down.

GBPUSD surged on the news, climbing to an intraday high of 1.3749, after beginning the day trading at 1.3601.

London’s FTSE 100 closed marginally lower on the news.

Oil prices rally to 2-month high

Oil prices rose for a second consecutive session, with today’s gains sending WTI crude to its highest level in 2-months.

The move came as WTI passed its recent RSI resistance of 58, which came on the news that some OPEC+ members had missed their output targets

News of this followed reports that Initial jobless claims in the U.S. rose by 16,000, coming in at 351,000 for the week that ended September 18th.

OPEC can influence world oil supplies and prices
The Organization of the Petroleum Exporting Countries (OPEC) can have a significant influence on oil prices by setting production targets for its members. OPEC includes countries with some of the world’s largest oil reserves. As of the end of 2018, OPEC members controlled about 72% of total world proved oil reserves, and in 2018, they accounted for 41% of total world crude oil production.

Markets had forecasted claims to drop to 320,000 applications for the latest week., however rose, despite many expecting a stellar NFP report for the month.

WTI crude hit an intraday high of $73.65, which is its highest level since late July.

Quote of the day – “Are you willing to lose money on a trade? If not, then don’t take it. You can only win if you’re not afraid to lose. And you can only do that if you truly accept the risks in front of you.”

– Sami Abusaad

Eliman Dambell

Senior Market Analyst

 

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