The current strength of the dollar drove the yellow metal to the bearish track after the opening bell on Monday session. In the midst of the soaring commodities, gold futures were left behind, easing close to 1 percent. Since the speculation for a rate hike lifted the dollar, the safe-haven assets are likely on the negative ground. The previous US economic data also strengthened the case of a rate increase as the largest economy in the world showcased signs of growth. Can the yellow metal move back to 1190 level? Or will it stick to its downward path?
XAU/USD Movement
At the time of writing, gold prices on the Commodity Mercantile Exchange for February contract lost 0.71 percent to $1,169.40 per troy ounce. Gold spot eased 0.80 percent to end at $1,168.40 per troy ounce, while silver declined 0.67 percent.
As seen in the graph provided, XAU/USD started at 1182.91 and slid to 1167.94 during the mid -session. The pair had a session high of 1169.07 and a session low of 1167.22, trading below its 20-day SMA of 1173.17 and 50-day SMA of 1172.04.
The Bollinger Band® will likely contract, which may trigger a price contraction in the following sessions. Currently, the support stands at 1168.76 and the resistance is at 1173.57. If the pair finds a breakthrough, the new support will be 1179.25, whereas, in case of a fall through, the new support will be at 167.00.
Contrary to the price movement of the yellow metal, copper futures went up 1.43 percent to $266.25 per pound on the Comex while the Platinum spot rose 0.43 percent to $933.20 per troy ounce.
Economic Factors
Traders have kept their bets on a December rate hike after the unemployment rate declined in the previous month. The chances of a rate adjustment intensified with signs of sustainability of the US economy. In the past statement of the US central bank, the doors were opened for an increase in rates provided the economy would be stable. In this case, the chance of a rate hike went 93 percent in the next Fed meeting happening this 13th and 14th of December.
Technically, a rate increase would increase the value of the US dollar and in times of currency appreciation, the yellow metal retreats. This inverse relationship between the gold and the greenback makes the cash rate hike a threat for the precious metals.
Meanwhile, the recently concluded Italian vote to refuse the constitutional amendment provided a temporary support to the yellow metal. Gold futures edged up almost 0.40 percent. The gains went from neutral to limited after the Prime Minister Matteo Renzi announced his intention to resign, since the modification of the constitution failed to be agreed upon.
Elsewhere, other commodities were soaring high led by the uptick of oil futures. Earlier today, OPEC confirmed a stronger commitment to reduce the existing global glut supply to take the oil prices back to the bullish track. Last week, OPEC agreed for an output cut of 1.2 million barrels per day starting January 2017. Non-OPEC members also agreed to participate in the output cut, which made the prices to hit fresh multi-month highs.
As of 14:31 UTC, WTI crude oil on the New York Mercantile Exchange for January contract advanced 0.37 percent to trade at $51.87 per barrel. Brent crude on the International Commodity Exchange for February futures moved 0.42 percent to $54.69 per barrel. Natural gas and heating oil also added 3.55 percent and 0.12 percent respectively.