Where to for oil after sanctions?
Published on 05.10.2018 21:14

After climbing in yesterday’s trading session back through the $1200 mark on the back of inflation worries, the gold price has once again pulled back as traders await today’s all important Non-Farm Payrolls figure from the US.

This economic news is seen as one of the main barometers in heling the US Federal Reserve deciding whether to lift interest rates any further this year so a strong reading today is likely to put pressure on the gold price at the expense of the US dollar.

Investors are currently enjoying the yields the US dollar currently provides which is something that gold does not give and is only valuable as a capital-gaining asset.

"A robust NFP non-farm payroll print coupled with signs of rising wage growth could fuel expectations over the Fed tightening policy faster than projected," said Lukman Otunuga, Research Analyst for FXTM.

"This is bad news for zero-yielding gold which losses attraction in a high-interest rate environment."

Some say the main hope for gold at the moment is rising inflation which is currently happening in the US as well as a number of other countries, and this factor may see money move into the precious metal as a safe haven investment to protect themselves against rising costs.

The room for further rate hikes is getting limited because the present level of the Fed funds rate is getting closer to neutral rate, estimated at 3 per cent by the FOMC members. That is why the Fed has removed “accommodative” word this time from the statement. This should drive the dollar lower thereby pushing gold prices higher.

The room for further rate hikes is getting limited because the present level of the Fed funds rate is getting closer to neutral rate, estimated at 3 per cent by the FOMC members. That is why the Fed has removed “accommodative” word this time from the statement. This should drive the dollar lower thereby pushing gold prices higher.

 “Other world government bond markets are also seeing their yields rise, in sympathy to the U.S. This is yet another clue that creeping price inflation could become problematic down the road,” said Kitco Metals senior analyst Jim Wyckoff . “That’s a bullish scenario for hard assets like raw commodities, and bearish for paper assets like stocks and bonds.” He added.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

The world of trading has no boundaries

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% of retail investor accounts lose money when trading CFDs with this broker. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

×

Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% of retail investor accounts lose money when trading CFDs with this broker. Before deciding to trade foreign exchange you should consider whether you understand how CFDs work, your investment objectives, your level of experience and readiness of taking risk. The possibility exists that you could sustain a loss of some or of all of your initial investments and therefore you should not risk more than you are prepared to lose. Please seek independent financial advice if necessary.

Important notice
By clicking "Continue" you will be redirected to the website operated by FIBO Group, LTD company registered in BVI and regulated by FSC. Please familiarize yourself with the Customer Agreement through the link. Click "Cancel" to remain on this page.