Mediocre Monday for Gold Market, Going Up and Down
Early in the morning, gold market was suffering some critical movements from gold hedge funds that abandoned the yellow metal, looking for other promising alternatives.
Even with a record performance for the recent decades, there are organisations and individual players that do not trust in a long-lasting bullish behaviour from the gold market.
It’s well remembered that most hedge funds in America bet against the precious metal during the last semester of 2015, possibly motivated by its poor performance during key events like the Grexit. Now, this strategy has a little sense.
But this was just the beginning of a more complex day. After the media covered this news about hedge funds getting out the gold market, gold suffered another blow.
The Money Factor
Last week, William Dudley, who is the New York FED president, told the media that the U.S. Central Bank is handling the hypothesis of raising the interest rates if the domestic economy keeps its actual course.
As expected, this commentary pushed hordes of investors to make bullish bets on the U.S. Dollar. This currency has been performing great in comparison with wounded rivals like the Euro.
At the same time, polls favouring Clinton for the upcoming elections also helped the Dollar, recovering investors’ trust in the currency over the possibility of having Trump winning this November.
The U.S. Dollar also benefited from the highly-expected report from the Chicago Federal Reserve. This report, released early today, showed how the domestic economy of the United States is performing beyond expectations.
This was a really pleasant surprise among all the suspense caused by the upcoming elections. As usual, the positive results of this report boosted the Dollar demand. The ICE U.S. Dollar Index, a popular reference of the currency value against other rivals, went up 0.15 percent by the middle of the trading session.
As a result, gold futures went down 0.30 percent at the same time. Last week, the gain was around 1 percent, so there is enough space to expect a recovery or even gains.
With a highly positive report regarding the U.S. economy, inflation could be around the corner. International markets have been facing deflation as a real threat to economic growth, so these indicators are now hopeful. The recent months hasn’t been easy in that sense.
Now the panorama has slightly changed. These numbers and recent declarations for the New York FED president, there is real evidence of a potential interest rates hike by the end of the year.
If investors are not afraid of the poor European Central Bank’s policies regarding deflation, the U.S. elections, or any other geopolitical event going on, they probably are going to look for riskier bets than gold.
Nevertheless, gold buyers will likely still remain as investment towards a profitable safe haven, even in the actual scenario. This one has been the best year for the precious metal since the 80s. While the market is cooling down a little bit, experts’ forecast are more optimistic about the mid-term.