XAU/USD: Gold prices continue to decline

XAU/USD: Gold prices continue to decline

20 July 2016, 12:43
PCM-Brokers
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TRADING RECOMMENDATIONS

 Yesterday, the dollar showed growth across virtually the entire foreign exchange market. From the United States continue to be positive macroeconomic data. So, June building permits and housing starts in the US showed a significant monthly increase than expected by the forecast (1.153 million and 1.189 million, respectively). Today, the strengthening of the dollar continues. The index of business expectations for the Eurozone in July, which came out with a value of 14.7, was at its lowest level since November 2012. The index of economic expectations in Germany in July, -6.8 versus 19.2 in June, the current conditions index in Germany in July to 49.8 against 54.5 in June.

Positive US data also give the Federal Reserve more reason to raise interest rates before the end of this year (probably in September), and the financial markets stabilized after the British decision to withdraw from the European Union.

It is expected that during the meeting of 26-27 July the Fed will keep interest rates unchanged. However, it is likely that the US central bank will hear statements about the improving state of the economy as compared to June, and the possibility of raising interest rates, if in the next few months, economic data will meet the expectations.

The stronger the position of the dollar in the foreign exchange market and the stronger will grow expectations of interest rates in the United States, the more pressure it will exert on the gold price quotes.

A stronger dollar increases the attractiveness for investment and reduces the demand for gold, as it becomes more expensive for holders of other currencies and the cost of borrowing in the storage and the purchase increases.

If the strengthening of the US dollar on the currency market continues, the price of gold, respectively, continues to decline.

 

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