Forex Today: Gold climbs above $4,200, USD slides on US-China tensions
Here is what you need to know on Wednesday, October 15:
Gold extends its impressive rally to a new record-high above $4,200 on Wednesday as markets assess the latest headlines surrounding the US-China relations. The US economic calendar will feature weekly Mortgage Applications and NY Empire State Manufacturing Index data for October. Policymakers from major central banks will be delivering speeches throughout the day as well.
US President Donald Trump said late Tuesday that they were considering terminating some trade ties with China, causing the US Dollar (USD) to weaken against its rivals.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.17% | -0.03% | -0.50% | 0.33% | -0.12% | 0.32% | -0.23% | |
| EUR | 0.17% | 0.14% | -0.25% | 0.48% | 0.14% | 0.48% | -0.08% | |
| GBP | 0.03% | -0.14% | -0.36% | 0.34% | -0.02% | 0.34% | -0.25% | |
| JPY | 0.50% | 0.25% | 0.36% | 0.76% | 0.32% | 0.83% | 0.19% | |
| CAD | -0.33% | -0.48% | -0.34% | -0.76% | -0.48% | -0.00% | -0.59% | |
| AUD | 0.12% | -0.14% | 0.02% | -0.32% | 0.48% | 0.36% | -0.23% | |
| NZD | -0.32% | -0.48% | -0.34% | -0.83% | 0.00% | -0.36% | -0.59% | |
| CHF | 0.23% | 0.08% | 0.25% | -0.19% | 0.59% | 0.23% | 0.59% |
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).
"I believe that China purposefully not buying our Soybeans, and causing difficulty for our Soybean Farmers, is an Economically Hostile Act. We are considering terminating business with China having to do with Cooking Oil, and other elements of Trade, as retribution," Trump posted on Truth Social. At the time of press, the USD Index was down nearly 0.3% on the day at 98.76.
Meanwhile, Federal Reserve Chairman Jerome Powell adopted a neutral tone in his speech before the National Associations for Business Economics (NABE) Annual Meeting in Philadelphia on Tuesday. Powell acknowledged that downside risks to the labor market had risen, while noting that there was also a risk that the slow pass-through of tariffs could start to look like persistent inflation. "The future path of monetary policy will be driven by data and risk assessments," he added.
France's Prime Minister Sebastien Lecornu announced on Tuesday that he intends to suspend the pension reform, which was designed to raise the retirement age to 64 from 62, until after the 2027 presidential election. Later this week, Lecornu will face two no-confidence motions. After closing in positive territory on Tuesday, EUR/USD continues to edge higher toward 1.1650 in the European session on Wednesday.
Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter said early Wednesday that recent data has been a little stronger than expected, adding that inflation is likely to be stronger than forecast in the third quarter. After sliding to its weakest level since late August below 0.6450 on Tuesday, AUD/USD stages a rebound and was last seen rising about 0.5% on the day near 0.6520.
GBP/USD benefits from the selling pressure surrounding the USD and recovers to the 1.3350 region in the European morning on Wednesday.
After posting small losses on Tuesday, USD/JPY continues to stretch lower toward 151.00 in the early 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.
