The price of gold jumped 0.7% after falling 4.63% last week, recording the largest weekly decline in more than 3 years. Today's price rebound was caused by partial profit-taking, stabilization of the US currency, as well as news related to the Ukrainian-Russian conflict.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.01% to 106.67. Last week, the index jumped by 1.61% and reached its highest level since November 1, 2023.
Market participants are also preparing for a speech by many Fed policymakers to get additional clues about the interest rate trajectory. At least seven Fed's officials are due to speak this week. Overall, the latest US economic data forced investors to further downgrade their expectations for a rate reduction in December. Experts said that we should expect less dovish rhetoric from policymakers in December, as the Fed prepares the ground for a rate hold in January, and investors' reassessment of the Fed's policy outlook could be a drag on gold. According to the CME FedWatch Tool, markets see a 65.3% probability of a 0.25% rate cut in December (compared to 76.8% a month ago). Higher interest rates reduce the appeal of holding non-yielding bullion.
The news that the United States has allowed Ukraine to use U.S.-made weapons to strike deep into Russia also came into focus. The change comes largely in response to Russia's deployment of North Korean ground troops to supplement its own forces. The move also comes two months before President-elect Donald Trump takes office on Jan. 20