Gold is hedging down during early Friday trading
Gold is hedging down during early Friday trading, after reaching fresh multi-month highs earlier in the week, due to the inverted correlation with the US dollar, as the greenback reached a new yearly maximum. The strength of the American currency arises from expectations that the Fed will move to hike rates in 2022 – earlier than previously expected – following the release of US inflation numbers which showed the fastest rise in consumer prices since 1990. Gold is seen as a good hedge against inflation, so the rise in consumer prices would normally be likely to offer support to the precious metal. However, the differential in market expectations, regarding the timings for hiking rates, between the Fed and other major central banks, creates scope for further greenback gains, as the Federal Reserve looks set to start hiking in 2022, while elsewhere the picture isn’t as clear. This scenario is likely to keep supporting the US dollar and therefore limit the upside for gold.
Ricardo Evangelista – Senior Analyst, ActivTrades
European benchmarks opened mixed on Friday, with losses in London and Madrid offsetting gains in Paris and Athens, despite a positive Asian trading session lifted by tech shares. Even if the global stock rally has slowed this week – mostly due to the inflation threat which sparked bets on much less dovish policies to come from Central Banks – the “risk-on” trading stance remains. Even if profit-taking moves following recent records reached by most benchmarks has put a bit of pressure on stock markets, the current decline in both Euro currency and European bonds is sustaining the appetite for riskier assets. However, markets are likely to remain volatile as investors will need to have more clues on where both the economy and monetary policies are going. Meanwhile, there is still a high chance that investors will keep pushing for new highs before the year-end.
Pierre Veyret– Technical analyst, ActivTrades
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication.
All information has been prepared by ActivTrades (“AT”). The information does not contain a record of AT’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of futures performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at their own risk.