This week, gold has taken center stage as it reached an unprecedented high of US$4,381 per troy ounce on Monday. However, subsequent profit-taking and massive sell-offs began on Tuesday. The price has subsequently dropped, nearing the US$4,000 per troy ounce mark.
The impending conclusion of the U.S. government shutdown and renewed trade negotiations with China are key drivers behind the profit-taking behavior. Both elements are expected to influence the broader financial markets moving forward, alongside the release of economic data. Here is the data from Trading Central:
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- UK Inflation (CPI) for September at 13:00 WIB: forecast 4% compared to the previous 3.8%
- UK Core Inflation (Core CPI) for September at 13:00 WIB: forecast 3.7% against the prior 3.6%
GOLD
Gold prices have plummeted by over US$230 or 2,300 pips, dropping to US$4,124 per troy ounce during Tuesday’s trading. The precious metal even hit US$4,081, marking its largest daily decline in 12 years.
This morning, gold fell more than US$120, settling at US$4,004 per troy ounce. The drop follows a record-setting high of US$4,381 per troy ounce just last Monday. Since the beginning of this year, gold has surged approximately 67%.
The resolution to the government shutdown and easing tensions between the U.S. and China have diminished gold’s appeal as a safe haven, leading to profit-taking actions. However, by this afternoon, gold rebounded to US$4,146, indicating renewed interest from market players following sharp declines yesterday.
Moreover, uncertainties persist regarding the conclusion of the shutdown, which largely remains speculative. The outcomes of U.S.-China trade discussions are also unpredictable, particularly concerning President Donald Trump’s planned 100% tariff hike on Chinese goods. High volatility in gold prices may continue into the European session, also opening potential for renewed buying activity.
OIL
Oil prices (CLS10) rose to US$57.56 per barrel on Tuesday, continuing to increase today to US$58.37 per barrel. This increase marks a rebound from the lowest levels seen since early May, driven by hopes for an improved global economy if the U.S. and China can avert a major trade war.
However, as mentioned previously, uncertainty surrounding U.S.-China trade negotiations leaves oil vulnerable to reversals.
EURUSD
The EURUSD pair registered a three-day decline, closing at 1.15964 on Tuesday’s trading. Compared to the previous day’s close, EURUSD fell by 416 points (41.6 pips).
The strengthening U.S. dollar, following reduced concerns over regional bank defaults, has put pressure on EURUSD. The dollar has also gained positive sentiment from easing tensions between the U.S. and China. This sentiment is expected to continue impacting the EURUSD exchange rate during the European trading session.
GBPUSD
The rise of the U.S. dollar caused GBPUSD to drop by 346 points (34.6 pips) to 1.33635 during the prior Tuesday’s trading session, reflecting a notable three-day decline. In today’s European session, the upcoming release of UK inflation data could lead to significant movement.
Should the data exceed forecasts, it may inject positive sentiment into GBPUSD. Accelerating inflation could make the Bank of England more cautious regarding interest rate cuts.
USDJPY
USDJPY surged by 1.172 points (117.2 pips) to 151.839 in Tuesday’s trading session. The strong U.S. dollar combined with a weaker yen resulted in this sharp increase.
The yen faced pressure following Sanae Takaichi’s official appointment as Japan’s Prime Minister. Takaichi is the first female PM in Japan and is typically supportive of fiscal stimulus. An influx of stimulus would increase the money supply, consequently weakening the yen. Therefore, USDJPY is expected to maintain positive sentiment.
NASDAQ
The Nasdaq index slightly decreased to 25,264 in Tuesday’s trading but remains near its all-time record high. This decline is attributed to profit-taking as investors await earnings reports from companies.
On the other hand, alleviated concerns over defaults and reduced risks of a U.S.-China trade war continue to provide positive sentiment for Nasdaq.
