Gold inter-markets: increasing odds of a Fed rate-hike and risk-on sentiment weighing heavily
|A surprisingly stronger-than-expected US monthly employment report for July, marking second consecutive month of impressive numbers, boosted the prospects of an eventual Fed rate-hike, sooner rather than later. Stellar jobs report lifted the greenback higher across the board and weighed heavily on dollar-denominated commodities - like Gold.
Following the release of headline NFP numbers, the yellow metal reversed sharply lower from close to three-week high level touched earlier during the week and tumbled to weekly low level, turning negative for the week to currently trade around 20-day SMA near $1340 region.
Friday's sharp slide has been primarily led by broadly strengthening US Dollar, as depicted by a sharp recovery in the USD/JPY pair. Moreover, a sharp rise in the US longer-term (30-years) Treasury bond yields and sliding Volatility Index (VIX) are further supporting the prevalent risk-on sentiment and is denting the safe-haven appeal of the precious metal.
The ongoing upbeat sentiment surrounding the US Dollar and the prevalent risk-on sentiment might continue to weigh on the yellow metal in the near-term. However, given that the next Fed meeting will not take place until September 20-21, any disappointment from the incoming US economic data will diminish possibilities of monetary policy normalization and could extend some support to the yellow metal. Also, a slight deterioration on investor risk sentiment would provide an additional boost to the safe-haven demand of the precious metal.
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