2016-10-05 12:06:05

Yesterday's sharp rise in the USD against major currencies continues today. The USD index WSJ, which measures the USD’s rate against 16 major currencies, has grown by 0.6%. The US stock indexes dropped yesterday. Dow Jones Industrial Average fell by 0.5% to 18168 points, S&P500 fell by about 0.5% and Nasdaq Composite - by 0.2%.

Monetary policy tightening, which is going to be implemented by the US Fed may have a positive impact on the USD, especially when many others Central Banks adhere to monetary easing policy. Judging by the futures market, investors estimate probability of the rate hike in December at 60%. Active sales of the Pound and the Yen on expectations of the interest rate hike by the Fed have increased the purchase of the USD against the precious metals.

The rise in the USD was also supported by the positive data on the US manufacturing sector for September and the statement by the Fed Cleveland President Loretta Mester suggesting the rise in the interest rate in the near future.

Yesterday, October futures for gold at COMEX fell by 3.3% to $1266.30 per ounce, which was the strongest decline since 2013. Spot price of gold fell to the level of 1269.00. The price of the October contract for silver, which are usually more volatile than gold, has dropped by 5.7% to $17.71 per troy ounce, which was the strongest decline since January 2015.

Expectations of the interest rate increase usually add pressure on the precious metals, which do not generate interest income. The rise in the interest rates negatively impact on the precious metals, as they cannot compete with the other assets because the cost of acquisition and storage of the precious metals is growing.

Now, investors are waiting for the US Non-Farm PayRolls for September, which will be published on Friday (15:30 GMT+3). In case of the positive data the chances of the rate hike in December will increase, which will add pressure on the precious metals.

Weak data on the US labor market will cause the decline in the USD and will trigger the purchase of the precious metals.

XAG/USD: the steepest decline in price since January 2015.  Fundamental analysis of 05/10/2016