Gold – Stable even as USD softens

Gold fails to capitalize on USD weakness

A softer dollar over the last 24 hours has given some reprieve to gold, which slipped below $1,300 last Thursday as the greenback benefited from weakness across a variety of other currencies.

The euro was quite slow to respond to the PMI data but it seems an improvement in overall risk appetite as the morning has progressed has seen it play catch up. This has put further pressure on the dollar, which was already being weighed on by gains in the pound on the back of Theresa May’s attempts to salvage Brexit with the help of the opposition, a move that could see Parliament form a majority around a softer exit.

Gold Daily Chart

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This reversal of fortune for the dollar has done little to lift gold, which remains quite flat on the day. Perhaps the improved risk appetite is undoing any good that a softer dollar may otherwise have brought, or maybe recent price action has just made gold bulls a little more apprehensive, with the price having broken back below $1,300, with $1,280 now offering the next major test.

There have been numerous supporting factors for the yellow metal, although with risk appetite returning and the dollar remaining strong it remains challenging for bulls.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.