Gold prices extended U.S. losses in early Asian trading on Friday, falling 0.01 percent to $1, 867.48 an ounce. In the US overnight, gold fell to its lowest level since September 28 as the dollar benefited from upbeat US economic data and risk aversion. However, the lack of a major driver after the CLOSE of U.S. markets prompted metal traders to look for more clues before extending their two-day downward trend and challenging the monthly low of $1,860 an ounce.
The dollar is strong and gold bears are celebrating
The dollar’s inverse correlation with gold has kept commodity prices near monthly lows as it welcomed upbeat US economic data, a challenge to risk and dovish comments from the European Central Bank. Meanwhile, hopes for a Democratic victory in the upcoming US presidential election and the dollar’s subsequent rise have also led market participants to turn to the greenback.
Not only did US gross domestic product rise by 31 per cent in the third quarter, which was higher than expected, to 33.1 per cent, but the four-week average of claims for jobless benefits fell from an upwardly revised 8.122,500 to 7.8725 as of October 23, which was also bullish for the dollar.
On the other hand, strong signals from the European Central Bank that it is about to ease monetary policy have supported the euro bears and, in turn, the dollar. The European Central Bank is expected to further curb the strength of the euro, leading to a strong dollar.
The vaccine will not survive another record-breaking outbreak
In addition, many European countries have imposed a strict blockade. Spain’s parliament approved a six-month extension of the state of emergency, although the restrictions were less stringent than those in Germany or France. The number of infections worldwide has now risen by a record half a million in a single day. Local authorities now have the power to restrict freedom of movement through blockades and curfews.
The latest weekly surveillance report from Public Health England shows that diagnosis rates are rising for all age groups in the UK except those aged 10 to 19. Dr Mike Tildesley, the government’s science adviser, said more national restrictions were needed and the current trend was likely to put almost everywhere in category two by Christmas. This is the second highest level of alert, with no restrictions on travel or use of transport, but people should work from home whenever possible.
Meanwhile, The European Commission President, Frederik von der Leine, noted that the EU had obtained potential vaccines being developed by Astrazeneca, Sanofi and Johnson & Johnson. They are in talks with Moderna and CureVac, as well as Pfizer and BionTech partners, about potential vaccines. But Russia has suspended vaccine trials for new volunteers. Clinics say demand is high and doses are insufficient, and Russia faces challenges in scaling up production of the main vaccine because of a shortage of equipment.
Gold traders will be keeping a close eye on recent moves in key risk events today, given that Asian markets don’t have much important data outside of Japan’s inflation data. Among them, if the DOLLAR index remains near monthly highs, the headlines about the outbreak and the latest news on economic stimulus measures are likely to continue to weigh on metals.