Forex News
Commerzbank’s FX team highlights that the People’s Bank of China rejected claims the yuan is undervalued, linking export strength to industrial competitiveness rather than currency manipulation. The central bank will start reporting FX operations to the IMF from 2027, while reserves slipped to USD3.40tn. In FX, USD/CNY fell 30 pips to 6.70, with USD/CNH little changed at 6.70.
Policy paper counters undervaluation claims
"The People’s Bank of China (PBoC) issued a policy paper rejecting claims that the yuan is undervalued, arguing that China's export strength reflects industrial competitiveness rather than currency manipulation."
"The statement came as EU trade officials opened two days of talks with Chinese counterparts, with Brussels increasingly framing bilateral trade imbalances as a currency issue. The PBoC’s paper signals Beijing’s intent to shape the narrative before any formal demands on exchange rate adjustment can gain traction."
"PBoC argued there is no linear relationship between the exchange rate and the current account balance, and that past periods of yuan depreciation did not accelerate China’s export market share gains. The central bank also announced that China will begin reporting foreign exchange operation data to the IMF starting in 2027, a concession to longstanding calls for greater transparency."
"Credit demand remains sluggish, and the investment-led policy push has not yet generated a broader economic rebound. China’s foreign exchange reserves fell to USD3.40tn at end-September (Bloomberg consensus: USD3.43tn) vs USD3.44tn at end-August, partly reflecting valuation effects from gold price weakness during the month."
"The move is modest in scope but notable in timing, offering a goodwill gesture to multilateral institutions as bilateral trade tensions with Europe escalate. Separately, the broader global push back against Chinese export dominance is intensifying, with France and Germany pushing the European Commission toward more assertive protective measures."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann note that USD/SGD remains supported within the Monetary Authority of Singapore’s policy band, with SGD NEER likely between 1.50% and 1.80% above midpoint, implying a 1.279–1.283 range. Short-term price action shows limited upward momentum, with resistance near 1.2835 and revised strong support at 1.2775.
Dollar-Singapore pair stuck in tight band
"24-HOUR VIEW: Two days ago, USD rose to 1.2810 and then closed 0.10% higher at 1.2797.” Yesterday, we noted that “the increase in upward momentum is insufficient to suggest a sustained rise.” However, we held the view that “there is a chance for USD to edge above 1.2810.” We added, “the major resistance at 1.2835 is unlikely to come into view.” USD subsequently rose to 1.2827 before easing to close 0.10% higher at 1.2810. There has been no further increase in upward momentum. Today, we expect USD to trade in a range, most likely between 1.2785 and 1.2820."
"1-3 WEEKS VIEW: The following are excerpts from our update yesterday (08 Oct, spot at 1.2795): “While upward momentum is building again, it is weaker than before, and USD is unlikely to reach 1.2835. On the downside, a breach of 1.2765 (‘strong support’ level) would indicate a period of range-trading.” There is no change in our view, but we are revising the ‘strong support’ level higher to 1.2775."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Commerzbank analysts note Taiwan’s September trade surplus hit a record USD23.6bn, with exports surging 60.9% year-on-year on strong AI-related demand. The Central Bank of the Republic of China may lean more hawkish if inflation’s uptrend persists. USD/TWD rose 0.3% to 31.90, but the pair’s upside may be limited as the central bank disclosed FX intervention in September.
Record surplus and CBC intervention
"September trade surplus surprised on the upside, widening to a record USD23.6bn (Bloomberg consensus: USD19.0bn) vs USD22.3bn in August. As a result, the surplus from January to September rose 61.9% yoy to USD160.6bn, which has already exceeded the full-year 2025 surplus of USD157.1bn."
"Overall, the stronger-than-expected trade surplus should reinforce the Central Bank of the Republic of China's (CBC) confidence in Taiwan's growth outlook. This could see them place a greater emphasis on inflation at the next meeting on 17 December meeting. Inflation averaged 1.9% between January and September but they picked up to 2.7% yoy in September."
"In FX, USD/TWD rose 0.3% to 31.90 yesterday, driven by broad USD strength, higher oil prices, and foreign portfolio outflows. Foreign investors were net sellers of USD2.6bn of Taiwanese equities, the largest daily outflow in nearly a month."
"USD/TWD has consolidated within the 31.65-31.95 range over the past month. Further upside to the pair may be capped by CBC intervention. The central bank disclosed that it intervened in September and may have sold up to USD1.1bn in the FX market."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- WTI touches $90.00 and gives back most of its rally on Trump's diesel post.
- Treasury licenses Russian diesel imports as Trump says 300K tons ship now.
After a call with Russian President Putin, President Donald Trump said on Friday Russia will immediately supply more than 300K tons of diesel to the US and global markets. He put the next shipments at 500K tons in November and 1 million tons after that. The first 300K tons come to about 2.2 million barrels, a little more than half a day of US demand for distillate fuels, which are mostly diesel.
Treasury's Office of Foreign Assets Control (OFAC) issued General License 135 the same day, allowing the sale and import of Russian diesel, including into the US, until April 7, 2027. It's the second diesel move President Trump has pushed in a week, after EU countries agreed on October 2 to a French proposal to release diesel stockpiles at his request.
New York diesel futures are near $4.67 a gallon after dropping again on the post, and have given back most of Thursday's rise. That's close to $196 a barrel against WTI near $90.50, a margin of more than $100 on the diesel US refiners make. Russian cargoes compete with that diesel, and a smaller margin gives refiners less reason to pay up for WTI.
Spot WTI fell from near $91.00 to just under $90.00 in the two five-minute bars after the post, giving back about three-quarters of its climb from the session low just under $89.50. The drop came from the second of two highs that both stopped short of $91.50.
On the charts
WTI has recovered to near $90.50 since then and is in the middle of the session's range between $89.50 and $91.50. Intraday momentum went from overbought to near oversold in the drop and is still falling.
WTI 5-minute chart
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
DBS Group Research expects China’s exports to grow 25.7% year-on-year in September, supported by strong electronics demand and improving manufacturing PMIs. The report notes strengthening external trade indicators and freight activity, alongside a rebound in factory-gate and raw material prices, with CPI inflation seen edging up to 1.0% but still constrained by soft domestic demand.
Strong exports with moderate CPI inflation
"Exports growth is expected to remain robust at 25.7% yoy in September, supported by continued strength in electronics demand."
"Both the official and Caixin manufacturing PMIs rose above the 50 expansion threshold during the month, pointing to improving manufacturing activity."
"External trade indicators also strengthened, with average daily deadweight tonnage handled at China's 20 major ports accelerating from -0.7% yoy in August to 7.2% in September."
"Freight activity improved as well, as growth in international cargo flights picked up from -1.4% yoy to 3.6% over the same period."
"On the price front, factory-gate and raw material prices rebounded amid the renewed escalation in geopolitical tensions. Main raw material purchasing price and producer price subPMI increased from 56.6 and 50.4 to 60.8 and 54.0 during the period. However, downstream consumer price pressures are likely to remain relatively subdued under the pricing-band mechanism."
"As a result, CPI inflation is expected to edge up from 0.8% yoy in August to 1.0% in September."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- DXY stalls below Monday's 18-month high near 102.50 as Fed officials repeat their hike case.
- Futures price about 20% odds of an October Fed hike and about 70% for December.
- US core CPI forecast at 0.2% MoM on October 14, headline at 0.6%.
Four sessions after its highest level since April 2025, the Dollar Index hasn't got back to it. The index trades near 102.25 and has made a lower high in each session since Wednesday. Fed officials spent the week arguing for another rate hike, and the 10-year Treasury yield reached its highest since 2002 on Monday, yet neither has taken the index higher. The US Consumer Price Index (CPI) on October 14 is the first release with a real chance to change that.
The two-year yield fell while the Fed made the case for a hike
Fed Governor Waller said on Thursday that more hikes are needed but don't have to come at back-to-back meetings, and St. Louis Fed President Musalem said rates should rise over the next six to nine months. Minutes of the September 15-16 meeting, released on Wednesday, showed most officials expect another hike by year-end. That matches the median projection of 4.1% for the end of 2026, which implies one more quarter-point hike from the current 3.75%-4.00%.
Futures put the odds of a hike near 20% for October 28 and near 70% for December 9, so the market took Governor Waller at his word on back-to-back meetings. The Dollar Index climbed with the two-year Treasury yield through September, and the two-year is the yield most tied to the Fed's next move. It fell from 4.84% on Monday to 4.75% on Thursday, while the 10-year has slipped back toward 5.25%.
Consumers rated conditions the worst on record and the index barely moved
Friday's preliminary University of Michigan (UoM) survey put consumer sentiment at 46.3, short of the 47.6 forecast and above only May's reading in the survey's history. Its gauge of current conditions set a record low, while households raised their year-ahead inflation expectations to 4.7% and their five-year expectations to 3.5%. That's the measure Governor Waller said he's watching for signs that higher prices are becoming expected ones.
Most of Friday's rise in the index came earlier, when Canada reported 68.3K job losses and USD/CAD rose to an 18-month high. The Loonie is 9.1% of the index, and Canada's report still moved it more than the US survey did. The Euro is 57.6%, and EUR/USD near 1.1200 is still above the 1.1150 area it held on Monday and Tuesday, so the index's largest component isn't giving it much either.
CPI is forecast to hand each side of the Fed a number
CPI is due Wednesday, October 14, at 12:30 GMT, with headline prices forecast to rise 0.6% MoM in September and the annual rate to reach 3.6% from 3.4%. Prices excluding food and energy are forecast to rise 0.2% after 0.3%, for 2.5% YoY. In the September minutes, some officials described the hike as insurance against persistent inflation and others as a way to stop energy costs spreading into other prices. A 0.2% core would be a month in which nobody had to make a claim.
A core reading of 0.3% or more could revive bets on an October hike and give the index a reason to clear 102.50. A 0.2% may leave December priced and October not, which is the setup that has held the index in its range since Monday. The Fed's Beige Book, its survey of regional business conditions, follows at 18:00 GMT the same day.
Producer Price Index (PPI) figures and retail sales come on Thursday, with sales forecast to rise 0.3% after 1.2% in August. A number well above that could firm up December, and a miss could add to the soft spending plans in Friday's survey. Fed Chair Warsh speaks the same day at 15:30 GMT, among the last scheduled remarks before officials stop speaking publicly on October 17 ahead of the October 27-28 meeting.
Bank of Canada (BoC) Governor Macklem speaks on Wednesday and Friday after two straight monthly job losses, and the Loonie's share of the index carries his tone into it. Monday opens with the US bond market shut for Columbus Day and Japan on holiday as well.
Levels and bias
Resistance: 102.50 stopped the index on Monday, Wednesday and Thursday, and Monday's high just above it is the highest since April 2025. Friday's high near 102.30 is the second lower high in a row, and 103.00 is the next round level above.
Support: 102.00 gave way briefly on Friday before buyers took the index back above it. Tuesday's low near 101.75 is the floor of the week, and 101.50 is where the late-September range topped out.
Bias: The lean stays short while 102.50 caps, with Tuesday's low near 101.75 the first objective and 101.50 the second. The daily Stochastic Relative Strength Index (Stoch RSI) is near 89 and has turned lower from the top of its range. A daily close above 102.50 ends the short and puts 103.00 in play.
DXY daily chart
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
On Friday, US President Donald Trump said he spoke with Russian President Vladimir Putin, who agreed to immediately supply over 300K tons of diesel fuel to the US and the global market, add 500K tons for November, and deliver 1 million tons “immediately thereafter.”
Trump added that “based on the condition of their diesel refineries, Russia will then deliver, within a short period of time, 3,000,000 Tons of Diesel Fuel.”
Trump’s full post on Truth Social:
“I have just concluded a highly successful discussion with President Vladimir Putin, of Russia, wherein it was agreed that Russia will immediately supply over 300,000 Tons of Diesel Fuel to the American and Global Marketplace, another 500,000 Tons during the month of November, and 1,000,000 Tons immediately thereafter. Additionally, based on the condition of their Diesel Refineries, Russia will then deliver, within a short period of time, 3,000,000 Tons of Diesel Fuel. Between our TOTAL CONTROL of the Strait of Hormuz, and this great announcement on Russian Energy, Diesel Prices for Americans and, indeed, the World, will be COMING DOWN, IN RECORD NUMBERS, AND FAST! Lower prices for Americans, especially our Great Farmers, Ranchers, and Truckers, is my Greatest Priority. This is a very big and important announcement. Additionally, it must be understood, that Iran will not have a Nuclear Weapon! Thank you for your attention to this matter. President DONALD J. TRUMP”
Market’s reaction
- West Texas Intermediate (WTI), the US crude Oil benchmark, dipped from around daily highs of $91.40 to $89.95, before the so-called 'black gold' settled above $90 per barrel.
- The US Dollar Index (DXY), which tracks the buck’s performance against six currencies, dipped from around 102.26 to 102.20 but remains positive for the day, up 0.08%.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
- XAG/USD rallies 2.80%, reclaiming $60 and reaching a two-day high.
- Bullish engulfing pattern could propel Silver toward the $64 SMA zone.
- Rejection below $60 exposes $58.50 and the August low at $56.57.
Silver (XAG/USD) price rallies over 2.80% on Friday as buyers buy the dip at $59.17, pushing the white metal above $60.00 to hit a two-day high of $61.19. At the time of writing, XAG/USD trades at $60.86.
XAG/USD Price Forecast: Technical Outlook
Price action shows Silver continues to consolidate even though it sits below the 50-, 100-, and 200-day Simple Moving Averages (SMAs), key resistance levels.
However, a ‘bullish engulfing’ two-candle chart pattern looms, and if confirmed, this could open the door for bulls to challenge the confluence of the 100- and 50-day SMAs at around $63.97-$64.29. A breach of that area could see buyers test a resistance trendline near $65.00, before aiming towards the next area of interest at $70.00.
On the flip side, Silver’s first support level is $60.00. A decisive breakout would put into play a move to the October 8 swing low of $58.50, followed by the August 3 low of $56.57.
XAG/USD Price Chart – Daily
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
OCBC’s Christopher Wong notes that Singapore Dollar (SGD) has held relatively steady despite a firmer US Dollar (USD) and higher Oil prices, with MAS tightening expectations underpinning the S$NEER. USD/SGD trades near recent highs with intact bullish momentum. With S$NEER already strong, further Monetary Authority of Singapore (MAS) slope steepening may not trigger significant SGD gains against a stronger Dollar.
USDSGD consolidation and MAS outlook
"SGD held relatively steady despite firmer USD and higher oil prices. MAS tightening expectations should underpin S$NEER, though its position on the strong side of the band may limit further gains, particularly against a stronger USD."
"USD/SGD was a touch firmer near recent highs. Last at 1.28 levels. Bullish momentum on daily chart intact while RSI is flat. 2-way trade still likely, as we keep a look out for rallies to fade into. Resistance at 1.2820 (100 DMA), 1.2840 (38.2% fibo). Support at 1.2740/50 levels (61.8% fibo retracement of 2026 low to high, 50 DMA)."
"For SGD, the implications may be more nuanced. With the S$NEER already trading on the strong side of its policy band, some tightening expectations may already be reflected in the currency. A slight slope steepening would reinforce the medium-term appreciation bias, but may not necessarily trigger significant further SGD gains, particularly against a firmer USD."
"Conversely, an unchanged stance could disappoint market expectations and see the S$NEER ease towards the midpoint. We continue to favour SGD resilience on a trade-weighted basis, although USD/SGD may remain sensitive to broader USD, US rates developments, sentiment shifts in the near term."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Gold rises 1.40% after rebounding from $4,130.
- US consumer sentiment falls to 46.3, missing expectations.
- October Fed hold odds reach 81% as December hike bets persist.
Gold (XAU/USD) price advances more than 1.40% on Friday, capitaliszng on a dip in US Treasury yields and a softer Greenback, as recent US data suggests households are becoming pessimistic about the economy, while investors seem confident that the Federal Reserve (Fed) will stay pat on rates.
XAU/USD climbs to $4,200 supported by falling US yields and a softer USD
XAU/USD trades at $4,194 and approaches the $4,200 mark after hitting a daily low of $4,130.
The University of Michigan Consumer Sentiment Index for October dipped to 46.3, down from 48.1, missing estimates of 47.6. Americans updated their inflation expectations for 1- and 5-year horizons, with the former expected to rise from 4.6% to 4.7% and the latter from 3.4% to 3.5%.
The data suggest consumer spending may dip in the foreseeable future, but Fed officials continue to see a resilient economy, supported by a solid jobs market.
The release of the FOMC’s last meeting minutes on Wednesday showed the board’s full support for a rate hike, though it revealed a division among policymakers: some saw the move as precautionary, while others saw it as the beginning of a tightening cycle.
Fed speaking continued this week, with Fed Governor Christopher Waller in favor of additional rate hikes, though not necessarily consecutive. St. Louis Fed Alberto Musalem said that inflation is high and that the strength of the labor market suggests the Fed must focus on tackling it.
Money markets have priced out a Federal Reserve rate hike in October, with an 81% chance of rates staying in the 3.75%-4% range. For December, there is an 81% chance of a 25-basis-point rate hike to the Fed funds rate, according to Prime Terminal data.
The US 10-year T-note yield is up 1.3 basis points at 5.248%, capping the buck’s fall. The US Dollar Index (DXY), which measures the Greenback’s performance against six currencies, is up 0.18% at 102.30.
Tensions in the Middle East rise
In the meantime, the US-Iran conflict seems far from a swift resolution, even though US President Donald Trump said that he would not attack Iran before the US midterm elections. Despite this, hostilities in Hormuz continued, while in the Red Sea, the Houthis laid mines in Bab el Mandab, aimed at disrupting vessel traffic.
What’s next for Gold investors?
Traders' focus must be on geopolitical developments, Oil prices, US Treasury yields and the US Dollar. Along with this, they need to digest next week’s inflation data on the consumer and producer side, followed by Retail Sales, Fed speaking and jobs data.
XAU/USD technical analysis: Gold challenges the bearish bias as it approaches $4,200
Gold’s downtrend may be at risk as buyers emerged near the low of the day (LOD) of $4,130 and pushed spot prices towards $4,207, the high of the day, before settling below $4,200.
Momentum has shifted mildly bullish, with the Relative Strength Index (RSI) rising but staying below its 50-neutral level.
However, if XAU/USD finishes Friday’s session and the week above $4,200, this could pave the way for a strong recovery. The next resistance is the 100-day Simple Moving Average (SMA) at $4,260. If breached, the next stop is the 50-day SMA at $4,335, before targeting $4,500. Once those levels are cleared, the next stop is the 200-day SMA at $4,529.
On the downside, if Gold dives below $4,150, a potential move to $4,100 is on the cards. Further downside lies below, with the psychological $4,050 ahead of the July 29 cycle low of $3,996, and $4,000 below.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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