A stronger dollar sent gold prices falling on Friday. The looming of a potential interest rate hike in December has weighed on precious metals. Gold prices fell to $1,251.6 a troy ounce, down over $6 to end the session.
Upbeat economic reports out of the United States on Wednesday led to a higher probability of an interest rate hike.
Several members of the Federal Reserve have indicated that a rate hike can happen “relatively soon.” A rate hike in December has been expected for months. The Fed Rate Monitor Tool points to a 64% chance of a rate hike, according to investor data.
It’s unlikely that the Fed will raise rates at the Nov. 2 meeting. The timing of a general election is too close for the Fed to increase rates.
Markets routinely fluctuate when the general election is around. A win by Trump or Clinton will have a major impact on markets. The Fed has remained cautious to raise interest rates all year long. A rise in rates at the next meeting wouldn’t make sense at this point.
Positive data for U.S. retail sales has increased the odds of a rate hike in coming months.
The U.S. dollar index slumped on Monday, ending the day down 0.12% at 97.87. The index increased 1.4% last week.
Fed Vice-Chair Stanley Fisher will be speaking in New York on Monday, as analysts dissect his speech for clues of a rate increase. This will be a topic of discussion on Tuesday morning. European Central Bank (ECB) President Mario Draghi is also slated to speak in Frankfurt.
Tuesday’s events include the Reserve Bank of Australia (RBA) speaking in Sydney. The RBA will also publish its most recent monetary policy minutes. The U.K., New Zealand and the U.S. are slated to release their inflation data on Tuesday.
We expect currency pairings to fluctuate on the data releases.
In the middle of the week, China’s third quarter economic growth report will dominate the news. The U.K. is slated to release its employment report. The U.S. will release permit and housing start data. The Bank of Canada will release its benchmark interest rate.
Australia’s job report, U.K. retail sales, U.S. jobless claims and the ECB benchmark interest rate will be released on Thursday.
The week will close with the U.K. reporting public sector borrowing data and Canada releasing inflation and retail sales reports.
Gold prices in Asia will remain down or stagnant ahead of China’s economic report. Silver and copper are also expected to remain stagnant in Asia.
Gold and silver are expected to continue pulling back going into the middle of the week. Both precious metals regrouped on Monday after a drop last week, but the commodities remain bearish. Weaker U.S. data will help gold edge higher.
Positive data out of the U.S. has a high probability of causing gold prices to decline by the end of the week.
The numerous Federal Reserve members delivering speeches this week as well as announcements from central banks will lead to a wild ride for gold this week, as investors look for positive signs in a noisy market.
Some analysts believe the “shaky” investors have already unloaded their gold, leading to less of a selloff this week.
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