Gold plummeted to a new 10-week low as slowing of global inflation significantly reduced the demand for price hedges and investors opt to stay light ahead of the primary U.S. jobs data and ECB rate decisions.
Gold was traded as low as $1262.20 last week which was its lowest price since June 12 this year and from a close of $1265.0. The precious yellow element had fallen 1.72 % last week as the dollar index rallied to a new 13-month high of 83.04 before finally easing to 82.90 afterwards.
Since the latter months of the second quarter, the geopolitical tensions in the Ukraine and in Russia as well as Israel-Gaza further intensified, the subsequent dollar index rallied approximately 5 % and gold has fallen more than 4 % since then.
Despite the geopolitical situation lately which was worsening, there is at least a certain degree matching the fall in gold or the rise in the greenback which traders contemplate in which other factors such as technical selling and worries regarding the health of the global economy all contributed to the metal being traded much lower.
Many were at most ahead of the long weekend last week which was commenced by a holiday but with nothing short of a major happening over the weekend on the geopolitical font which primarily began in liquidating positions. Moreover, the present week is marked with several press releases such as PMI numbers, ECB rate decisions, BoE resolutions and most especially U.S. non-farm payroll data which in effect will generally look to stay light on their positions ahead of such hefty set of data.
Things keeping the Fed, BoE and ECB busy
Both of the ECB and BoE are not expected to prevent the main policy rates in general but the unexpected split in the BoE MPC voting with two members in favour of a rate hike last week will bring the recent meetings into creating more beneficial results.
Moreover, the ECB is readying itself for more stimulus and the most recent set of confidence and PMI data from the general currency area is indicative that the time for such a move is already due.
Any indications by the ECB chairman at the post-policy press meeting recently concluded last week regarding the additional stimulus will hopefully set the momentum of the dollar rising further higher which will have detrimental effects in further adding to the losses of gold in general.
The U.S. employment report last week is considered the most watched economic data along with the outcome which will indicate where the Fed is headed in terms of the policy rates as central banks are being more cautious in their efforts in addressing the looseness in the labour market before any rate hike can be implemented.
Slowing the Global Inflation
Another major indicator that came in the recent weeks was the OECD inflation estimates that revealed that the prices in the 34 member bloc is decelerating fast. The July inflation for OECD economies came in at 1.9 % from 2.1 % in June, year-on-year. They said that the trend reflects the continued less than performing overall global growth.
Finally, according to traders in general, the OEC report is a different indicator for deflationary pressures in the global market which adds to the downward pressure on commodities.