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  • WTIOIL
    70.04 USD -2.02%
  • XAG
    23.96 USD -0.14%
  • XAU
    2010.5 USD 0.48%
  • XCU
    3.73 USD -1.34%
  • XPD
    1478 USD -0.78%
  • XPT
    1048 USD 0.64%
  • ALU
    2243.47 USD -2.23%
  • RICE
    18 USD -1.75%
  • BRENTOIL
    74.17 USD -1.32%
  • SOYBEAN
    14.35 USD -0.66%
  • NG
    2.27 USD 0.27%
  • WHEAT
    256.22 USD -1.15%

Gold gains due to weaker US Dollar

The US Dollar index weakens by more than 0.7% this month. It helps gold to correct losses from last month. Volatility persists with inflation data ahead.

Gold bounced from $1700

The strong psychological level of $1700 worked well as a support. Gold tested this level twice, right at the beginning of the month. Moreover, the weaker US Dollar helps bullion to elevate at the price. The picture shows the development of Gold futures (GC) and the US Dollar Index (DXY) in this month. In 12 days, gold has gained +1.32% while DXY has declined by 0.76%. A highly negative correlation is clearly visible. 

You may be also interested in: ECB hikes rates, DAX falls 1.5%

The comparison in development between GC (Gold Futures) and DXY (The US Dollar Index). Source: tradingview.com

The comparison in development between GC (Gold Futures) and DXY (The US Dollar Index). Source: tradingview.com

Fed decision as a strong market mover

Fed interest rates decision is set on the 21st of September with an expectation of 3.25%, which means a hike by 75bps from the current 2.5%. A decision is commonly known as a strong market mover. The last press conference held by Jerome Powell, the chair of the Fed, at the Jackson Hole Symposium showed a solid hawkishness in monetary policy. Gold fell to a psychological level of $1700, but despite this, gold corrected the decline and is attacking $1750. This area could be set as the closest resistance, which was set up by the monthly VWAP level from last month and 1st standard deviation in monthly VWAP in the current month (white arrows show where the price reacted). 

30 minutes chart of GC (Gold Futures), Price reaction on Monthly VWAP. Source: Author's analysis

30 minutes chart of GC (Gold Futures), Price reaction on Monthly VWAP. Source: Author’s analysis

The US inflation ahead

Tomorrow will bring new data from the US inflation. The consensus of year-to-year change is 8.1%, and month-to-month -0.1%. Inflation data are very closely watched by investors because inflation can bring more insight to the next monetary policy meeting. Higher inflation can spark sales in the markets, on the other hand, better than expected numbers can bring more optimism. Investors can await a highly volatile rest of the month. 

Tomas is a professional trader and money manager on foreign exchange market from 2014. His main domain are commodities. Experiences gained due this period are transformed to consul...

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