Gold price climbs to 3-week high as USD falls

[MongiIG]

There’s been a retracement of the recent strength of the US dollar and as a result, the price of gold has recovered. The move in the dollar came after US JOLT's job openings.

 Jeremy Naylor | Analyst, London | Publication date: Wednesday 30 August 2023 

They were expected at 9.5 million, which would have been a May 2021 low, but came in at 8.827 million. This means that the labour market slowdown is accelerating after months of unprecedented monetary policy tightening by the Federal Reserve. Questions are now circling that the Fed may now have done enough.

(Video Transcript)

JOLT openings

Now, we've been witnessing a relatively hefty drop in the USD after the jolt openings yesterday, the job openings out in the States that were expected at 9.5 million, which would have been a low not seen since May 2021. In fact, they came in at 8.827 million. Now, what's this mean?

Well, it means that the labour market slowed down after accelerating months of unprecedented monetary policy tightening by the Fed. The count peaked in March 2022 at just above 12 million job openings, then gradually slowed to 11.2 million at the end of 2022. Since the slowdown, it's been pretty much constant.

The dollar

The USD taking the biggest hit yesterday. I want to show you this chart, which is the dollar basket down yesterday for the second day in a row. In fact, you can see at the moment, we are absolutely on this line of support, which was the resistance that we saw twice back at the back end of June at the beginning of July at 103.20, the country trading at 103.20. The dollar hitting that news on the jolt numbers yesterday.

And this sort of figure reduces the chance that further Fed interest rate rises. So that's why we're seeing a drop in the dollar. Now, as a result of this, we have seen moves in a lot of the major crosses. Yesterday, the euro up above this prior line that we'd be watching of the 61.8% retracement at 108.80. It's now trading down a little bit below that.

Gold price

But I think more importantly, it's been a bit of relief for the price of gold. Now, gold has risen over the last couple of weeks or so. And yesterday it traded up and stayed up above the 50 period moving average and the country trading at 19.36.

This, of course, is the gold price in dollars, which when you get the dollar move like we've had, you get the country move in the price of dollar based commodities because of the currency factor. So nonetheless, gold is up as we see there at 19.36.