2016-09-19 16:18:29

Last Friday the USD went up due to the positive US inflation data, which was above the forecast. Since the opening of today’s trading session the USD is going down. Friday’s statistics showed that the US consumer price index (CPI) rose by 0.3% against the forecast if forecast +0.2% and by 1.1% on annual basis against the forecast of +1.0% in August. The USD index WSJ, which reflects the value of the USD against a basket of 16 major currencies, has grown by 0.8%, to 87.17 reaching two- week lows. Inflation is one of the key factors influencing on the interest rates decision along with the data on labor market and GDP.

However, markets do not expect that the US Fed will raise interest rate in September. Probability of the rate hike in September is 15%.
On Monday, gold prices rose in London due to the weakening of the USD. Investors are waiting for the decision on the rates and statements by the US Fed on Wednesday at 21:00 and 21:30 (GMT+3).

If the Fed does not raise the rate, as it is expected by the market participants, the USD will fall in the foreign exchange market, including the pair XAU/USD. However, the decline of the USD is likely to be short-term. Probability of the rate hike in December still exceeds 50%. This factor will support the USD in the market until the end of the year.

The price of gold will remain under pressure in anticipation of the interest rate increase at the end of the year. In case of the interest rate increase, investment attractiveness of gold is decreasing, while the USD and safe-haven currencies go up.
A stronger dollar also makes gold prices, which are denominated in U.S. currency, less attractive for the holders of the other currencies, as the borrowing costs for its acquisition and storage are growing.

At the same time, demand for gold will continue due to the tendency of the lowering interest rates by some of the world's Central Banks and further monetary policy easing and the continuing uncertainty about future global economy, caused by Brexit.

XAU/USD: demand for gold will continue. Fundamental analysis of 19/09/2016.