After rising rapidly due to the US NFP report last week, gold prices are now slipping. Investors will be keeping an eye on the US CPI for further clues.
Gold prices fell slightly due to the strengthening of the US Dollar in the trading session Monday (06/December) tonight. Spot gold fell 0.4% to $1776.30 an ounce, and gold futures on the Comex in New York slipped 0.3% to $1779.10. Meanwhile, the following chart of XAU/USD shows a decline of 0.26% to $1778.16.
The US dollar strengthened amid uncertainty over the impact of the Omicron variant which has now spread to 15 US states. The US Dollar Index is up about 0.1%, making the cost of holding gold noticeably more expensive for buyers in currencies other than the USD.
Not only the US dollar, equities and bond yields have continued to rebound since last week. This is because the infection with the Omicron variant is not expected to make the Fed waver from its plan to accelerate bond tapering. Nevertheless, analysts are still cautious in anticipating the risk outlook going forward.
"While the strengthening US dollar, yields and risk appetite are fading gold's appeal, the market is still in limbo as Omicron and the Fed's policies to tackle inflation are both gaining public attention," commented Saxo Bank analyst Ole Hansen.
Keep an eye on US Inflation Data, Choppy Gold
Next, the market will be eyeing the US CPI report this week. Lower-than-expected US CPI data is expected to dampen expectations of a Fed rate hike next year. This can be a gap for gold to gain demand apart from the weakening stock market.
"Gold will still be in a choppy trading environment due to the pulls in the market. On the one hand, we have a market anticipating a faster tapering. On the other hand, we have safe haven demand due to high inflation," said David Meger, analyst. High Ridge Futures.
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