Gold is on the upswing, thanks to a sluggish US dollar

The greenback is shedding gains made over the last two sessions

By Raed Alkhedr | @raedalkhedr | 7 December 2023

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  • Gold is gaining ground as the US dollar takes a dip.

  • Oil is rebounding from its lowest point in 6 months.

  • The euro is extending its losses to the lowest level in 3 weeks.

- Economic data negativity weakens the dollar, and gold rises:

Gold prices rose today, extending gains for the second consecutive session, thanks to the slowdown of the US dollar against most major currencies and commodities. Investors are eagerly awaiting the US job data scheduled for release tomorrow, Friday, as it may provide new clues about the Federal Reserve's stance on interest rates.

On the flip side, negative US private employment data for November, coupled with a significant drop in US Treasury yields, intensified downward pressure on the dollar in today's trading.

Data from the ADP Foundation indicated an increase in private sector employment by 103,000 jobs, below market expectations of around 130,000 jobs and worse than the previous reading, which reported the addition of about 106,000 jobs.

- Oil rebounds from its lowest levels in 6 months, supported by market optimism about demand:

Crude oil prices witnessed a strong increase on Thursday, recovering from their lowest levels in 6 months, supported by market optimism about the recovery of Chinese and American demand for oil.

Data released in China today revealed a 1.7% year-on-year increase in exports in November, compared to -3.1% in October. Imports also rose by 0.6% in November, compared to 6.4% the previous month. Additionally, the Chinese trade surplus increased to CNY 491 billion compared to CNY 405 billion in October, boosting optimism about economic activity recovery in China.

On another note, the US Energy Information Administration reported a decrease in US oil inventories by 4.6 million barrels last week, surpassing market expectations of a 2.26 million-barrel decline.

In trading, crude oil started the day with a significant increase, rising by about 0.90% near $69.87 per barrel.

- Possibilities of interest rate cuts push the euro lower:

The euro experienced a decline against a basket of major currencies today, deepening its losses for the seventh consecutive session against the US dollar, hitting its lowest level in three weeks. This is due to speculations about a European interest rate cut early next year.

François Villeroy, Governor of the Bank of France and a member of the European Central Bank, stated that a reduction in European interest rates may occur in 2024, noting that the contraction in the Eurozone is happening faster than anticipated.

Isabel Schnabel, a member of the Executive Board of the European Central Bank, mentioned that further interest rate hikes in the Eurozone are somewhat unlikely, especially after the inflation data for November.

Regarding data, the Gross Domestic Product (GDP) for the Eurozone fell to 0% on a yearly basis in the third quarter of 2023, compared to a growth of 0.1% in the second quarter. The quarterly indicator remained unchanged at the same levels as the previous reading, showing a slight decline of about 0.1%.

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