The gold price failed to top its three-day running streak this yesterday and is in retreat for its second session this morning, having fallen back from a one-month high. The recent rally appears to have stalled but it may disappear should the U.S. dollar begin to rally.
London gold moved in a $10 range Wednesday morning around $1,281 per ounce as both the U.S. House and Senate were due to meet in what headline writers called "a last ditch attempt" to resolve the government's debt-limit deadline, set for tomorrow.
Gold continued losses into a third session after comments by a Dallas Fed official ramped up fears that the U.S. Fed could begin tapering soon. Today, the governor of the Bank of England unveiled a Fed-style forward guidance.
Precious metals rallied in London on Tuesday morning as European stock markets also bounced with commodity prices. The U.S. dollar eased back on the currency market, as did major government bond yields.
While news that the euro zone had reached a deal on the next installment of aid for Greece initially pressured the US dollar and lifted gold and the euro a tad, its impact wore off relatively quickly and markets opened with a different tenor this morning.
Commodity prices are facing selling pressure to start the trading week as worries about the impact of Hurricane Sandy on US economic activity spark broad-based risk aversion. Sentiment-anchored crude oil and copper prices are following shares lower.
Gold no longer has a legal role in the world’s monetary system, but because of a collapse of faith in sovereign obligations and a coming complete lack of trust in governments and financial institutions, gold is going to quickly become a core banking asset.
Commodities corrected narrowly higher overnight after yesterday’s broad-based selloff. The spotlight turns to September’s US consumer confidence reading and the Richmond Federal Reserve manufacturing index.