Gold futures are trading lower on Thursday, but trading up from a two-month low reached earlier in the session. The market continues to be crushed by a stronger U.S. Dollar, which is dampening foreign demand for the dollar-denominated asset. The catalyst behind the selling pressure remains uncertainties surrounding further stimulus measures to support a sluggish economy in the United States.
At 10:13 GMT, December Comex gold is trading $1857.40, down $11.00 or $0.59%.
Another plunge in riskier assets caused by uncertainty around the resurgence in coronavirus cases and prospects of further federal stimulus measures encouraged investors to sell their gold holdings to cover losses and meet margin calls.
Wednesday’s sell-off after U.S. Federal Reserve officials tried to convince investors they will keep monetary policy easy for years to allow unemployment to fall suggests investors are getting tired of hearing the same promise from the Fed and would prefer the policymakers to take immediate action. Meanwhile, the Fed is calling on greater fiscal help from Congress.
With neither the Fed nor Congress ready to take aggressive action to prevent another economic down turn, Dollar bulls are taking advantage of the stalemates, while gold falls victim to the greenback’s sudden rise.
Optimism on a strong recovery over the past six months has faded, optimism on containment of the coronavirus and robust bets on continual stimulus support from the government and Fed were keeping gold prices well bid, but now all three factors are creating uncertainty. And when there is uncertainty, traders move money into safe-haven assets like Treasurys, the U.S. Dollar and the Japanese Yen. They also liquidate expensive assets like stocks and pay for their margin calls and losses by selling gold.
Those who still believe that gold is a safe-haven asset have to have learned by now that it’s more of a store of value. Holding gold during times of turmoil doesn’t stop the stock market from plunging, but selling it does help cushion the blow from the losses.
Thursday’s focus will shift to the latest jobless claims report from the Labor Department, due at 12:30 GMT, with economists polled by Reuters expecting new unemployment filings last week to come in at 840,000, down from 860,000 the previous week. Continuing claims are also expected to fall.
Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin will resume testimony before Congress at 14:00 GMT, while August’s new home sales figures are published at the same time.
Keep an eye on the jobless claims report for any surprises that could create a volatile response by the U.S. Dollar and consequently gold.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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