Significant moves in gold, silver and the US dollar

Dollar advances on hawkish Fed comments, gold tumbles

Dollar advances on hawkish Fed comments, gold tumbles

The US dollar index soared on Tuesday as expectations of an interest rate hike rose following hawkish comments from Federal Reserve officials. Meanwhile, an informal consensus has built among policy makers that the ECB is ultimately planning to taper their quantitative easing program which is expected to end by March 2017.This increases the likelihood of a US rate hike and furthermore, uncertainties on ECB’s extension of its asset purchasing plan has led to a temporary sentiment that is risk-off. 

US equity indices retraced last night as market sentiment become more cautious ahead of this Friday’s Non-farm payroll numbers, which will impact Federal’s next FOMC rate decision in early November.

At the same time sterling weakened further against USD to a 31-year low on the back of worries that stems from a possible “Hard Brexit”. USD/JPY rose to a one- month high of 102.90 last night. Weaker GBP has reinforced the strengthening of the dollar index.
Strong USD has led to significant moves in the currency and commodities market. 

Meanwhile, gold and silver prices tumbled, with significant drop of 3.3% and 5.8% respectively. Gold has broken key support levels of $1,286 and thus the next support level is likely to be around 1,240 area. Silver has also dropped below its psychological support level of $18.00 and the next key support will be $17.48. 

China curbs property market with cooling measures
A series of cooling measures including increasing the down payment ratio for a second property have been announced in nine, tier-2 cities during the China National Day holiday, showing the authority’s determination to control the over-heated property prices. 

The crash of the stock market at the end of 2015, low interest rate environments and surging households leveraging on property investment early this year have led to a boom in the property markets especially in China’s tier-1 and tier-2 cities. This bubble-like rally in the country’s property prices has led to increasing concerns of its stability and sustainability. 

The overheated property market has contracted any room for further interest rate cut or Required Reserve Ratio (RRR) cut by the central bank in order to support the economy. 

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