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Forex Today: Gold closes in on record-high, eyes on US producer inflation data
Here is what you need to know on Tuesday, August 13:
While major currency pairs spent the first day of the week fluctuating in tight ranges, Gold gathered bullish momentum and climbed above $2,470. The trading action turns subdued early Tuesday as investors await the July Producer Price Index (PPI) data from the US. During the European session, Germany's ZEW Institute will release August Economic Sentiment data for Germany and the Euro area.
US Dollar PRICE Last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.21% | -0.19% | 2.56% | -0.68% | -1.55% | -1.56% | 1.81% | |
| EUR | -0.21% | -0.38% | 2.34% | -0.90% | -1.78% | -1.84% | 1.61% | |
| GBP | 0.19% | 0.38% | 2.74% | -0.50% | -1.39% | -1.45% | 1.94% | |
| JPY | -2.56% | -2.34% | -2.74% | -3.18% | -4.00% | -4.08% | -0.61% | |
| CAD | 0.68% | 0.90% | 0.50% | 3.18% | -0.88% | -0.94% | 2.46% | |
| AUD | 1.55% | 1.78% | 1.39% | 4.00% | 0.88% | -0.05% | 3.39% | |
| NZD | 1.56% | 1.84% | 1.45% | 4.08% | 0.94% | 0.05% | 3.49% | |
| CHF | -1.81% | -1.61% | -1.94% | 0.61% | -2.46% | -3.39% | -3.49% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The US Dollar Index (DXY) closed virtually unchanged on Monday as investors refrained from taking large positions. Wall Street's main indexes ended the day near the previous week's closing levels and the 10-year US Treasury bond yield extended its downward correction, losing nearly 1% on the day. In the European morning on Tuesday, the DXY holds steady slightly above 103.00 and US stock index futures trade marginally higher. According to The Times of Israel, Israel Defense Forces expect an attack by Iran by Thursday.
The UK's Office for National Statistics (ONS) reported on Tuesday that the ILO Unemployment Rate declined to 4.2% in the three months to June from 4.4%. This reading came in below the market expectation of 4.5%. Other details of the UK jobs report showed that the wage inflation, as measured by the change in the Average Earnings Excluding Bonus, edged lower to 5.4% from 5.7% in the same period, surpassing analysts' estimate of 4.6% by a wide margin. GBP/USD gained traction after these data and was last seen trading in positive territory slightly above 1.2800. The ONS will release July inflation data in the early European session on Wednesday.
EUR/USD registered modest gains on Monday and snapped a four-day losing streak. The pair stays relatively quiet below 1.0950 in the European morning on Tuesday.
Crude oil prices rose sharply on Monday, boosted by the ongoing conflict in the Middle East and reports suggesting that Saudi Aramco is looking to lower its oil output from September. The barrel of West Texas Intermediate (WTI) rose over 3% on Monday and reached its highest level since mid-July above $80. Early Tuesday, WTI trades in a tight range at around $79.50.
Gold benefited from retreating US Treasury bond yields and gained more than 1.5% on Monday. After rising toward $2,480 during the Asian trading hours on Tuesday, XAU/USD staged a technical correction and was last seen trading near $2,460.
USD/JPY posted marginal gains on Monday and continued to stretch higher toward 148.00 in the Asian session on Tuesday.
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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