Forex Today: Gold and Silver selloff continue to start new week
Here is what you need to know on Monday, February 2:
Gold and Silver start the new week under heavy selling pressure after suffering huge losses on Friday. The US economic calendar will feature the Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) report for January later in the day and investors will keep a close eye on comments from Federal Reserve (Fed) policymakers.
US Dollar Price Last 7 Days
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.16% | -0.15% | 0.31% | -0.34% | -0.23% | -0.74% | -0.18% | |
| EUR | -0.16% | -0.31% | 0.18% | -0.50% | -0.37% | -0.90% | -0.34% | |
| GBP | 0.15% | 0.31% | 0.15% | -0.19% | -0.08% | -0.59% | -0.03% | |
| JPY | -0.31% | -0.18% | -0.15% | -0.65% | -0.54% | -1.03% | -0.49% | |
| CAD | 0.34% | 0.50% | 0.19% | 0.65% | -0.01% | -0.38% | 0.16% | |
| AUD | 0.23% | 0.37% | 0.08% | 0.54% | 0.01% | -0.53% | 0.05% | |
| NZD | 0.74% | 0.90% | 0.59% | 1.03% | 0.38% | 0.53% | 0.56% | |
| CHF | 0.18% | 0.34% | 0.03% | 0.49% | -0.16% | -0.05% | -0.56% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
US President Donald Trump announced on Friday that he nominated Kevin Warsh, who served as a Fed Governor from 2006 to 2011, as the new chair of the Fed. With the immediate reaction, the US Dollar (USD) gathered strength against its rivals, with the USD Index rising more than 1% on the day. In turn, Gold and Silver, which have been benefiting from the uncertainty surrounding the Fed policy outlook under the new chair, declined sharply. Gold (XAU/USD) lost nearly 9% on a daily basis, while Silver (XAG/USD) fell more than 25%. Early Monday, XAU/USD trades below $4,600, losing more than 6%, and XAG/USD is down about 10% near $77.
After ending the volatile week marginally higher, the USD Index holds steady above 97.00 in the European morning on Monday. Later in the week, investors will pay close attention to employment-related data releases from the US.
The Reserve Bank of Australia (RBA) will announce monetary policy decisions in the Asian session on Tuesday. Markets expect the RBA to raise the policy rate by 25 basis points (bps) to 3.85% from 3.6%. After losing more than 1% on Friday, AUD/USD extended its slide in the early Asian session on Monday before finding support. At the time of press, AUD/USD was trading marginally lower on the day, near 0.6950.
EUR/USD turned south on broad USD strength on Friday and lost 1%. The pair stays relatively quiet in the European morning on Monday and fluctuates at around 1.1850.
USD/JPY climbed to a fresh weekly high above 155.50 to start the week but lost its traction. As of writing, USD/JPY was trading virtually unchanged on the day near 155.00.
GBP/USD struggles to stage a rebound following Friday's sharp decline and moves sideways below 1.3700 to begin the European session.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
