For a long time, traders considered American Non-farm Payrolls (NFP) the most important release in the market. However, the situation has changed. Now US CPI moves financial markets.
Gold heads south on soaring greenback
On Friday, demand for gold slumped in the face of the growth of the evergreen buck.
Gold futures went down 0.08%, ending up with about $1,288.4 per troy ounce.
Prices for gold went down due to the appreciation of the greenback as well as the yield of US government bonds.
The US dollar index, normally gauging the purchasing power of the major American currency against six leading rivals, stuck with a low of five months - 93.69.
Gold is traditionally traded in the US dollar, therefore gold prices depend a lot on the value of the evergreen buck. With a strengthening greenback gold becomes more costly for those who keep other currencies.
In addition, prices of the number one precious metal dived due to the growth in the yield of American bonds. The revenue of 10-year US government bonds accounted for 3.089% after Thursday recorded a peak of seven years – up to 3,126%.
The surge in the yield of American bonds, upbeat economic reports as well as the acceleration of inflation have underpinned forecasts for a further increase in the Fed's interest rate and also tightening of monetary policy.
In March, the Federal Reserve lifted the interest rate and also predicted two more of its increases by the end of the year. However, some investors predict that there will be up to three such lifts. A higher interest rate, usually acts as a support for the evergreen buck because it makes dollar assets more attractive for profit-seeking traders.
A faster lift in the interest rate becomes rather a negative factor for gold prices, whose owners simply don’t get interest. When the cost of borrowed funds is going up, it’s very difficult for the most popular yellow metal to compete with high-yield assets.
Silver futures dived 0.49%, hitting $16.40 per troy ounce.
United States Bureau of Labor Statistics will release monthly average hourly earnings, non-farm employment change (NFP), and unemployment rate on November 5, 14:30 GMT+2.
United States Bureau of Labor Statistics will release monthly average hourly earnings, non-farm employment change (NFP), and unemployment rate on October 8, 15:30 GMT+3.
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