During the last part of the year 2016, the green bucks have gained immense strength in the global market and pushed the price of gold lower to the ground. The dollar bulls gained their first bullish momentum on the ground in the event of the U.S presidential election held on 8th November 2016.Mst of the leading investors were worried about Mr. Trump reign due to his anti-social policy in the market. However, things have greatly favored the U.S economy as Mr. Trump stated that they are going to increase the fiscal spending from the very beginning of the next year and they will also reduce tax imposed upon their citizen. The green bucks gained strong momentum in the market on that event and pushed the price of gold down in the market. The skyrocketing dollar index wiped out the gold bulls in the market and created a significant low in the market. Most of the professional traders were staying on the sideline in that time as the interest rate decision by the FED was still pending.
Interest rate hike by the FED: The green bucks gained its strongest bullish momentum in the market in the last FOMC meeting minute as the FED raise their interest rate on the basis of 25 points. The anticipated rate hike greatly supported the dollar and push all of its major rivals lower in the global economy. Since the price of gold is measured in a dollar a slight variation in the U.S interest rate significantly affects the U.S dollar in the global economy. On that event, the U.S dollar index secured a 14 years record high in the global market. The U.S dollar index is the measure of the overall strength of the U.S economy in contrast to six major currencies in the world. When the price of U.S dollar index rallies higher the price of gold tumbles in the ground. Such a huge surge in the U.S dollar index has not been seen by the traders since 2003.the leading gold investors were relieved after the drop of U.S dollar index from its 14 years high in the global market since such imminent drop will favor the gold bulls to a great extent. The gold price hit a critical support level in the market but after hitting that critical support level it found strong bullish pressure in the market due to slip of the U.S dollar index. The price of gold started its bullish correction after hitting the critical support level at 1122.27 in the market.
Dollar regained its strength prior to week closing: In the last trading week the gold price continued its bullish correction in the market but the bear took control of the market in last Friday after the average hourly income of the U.S consumers increased by 0.4% in the global economy. The price of gold started to fall after hitting the critical resistance level at 1184.49 in the market. However, some of the leading gold investors are thinking that it’s a minor bearish retracement over the course of longer term bullish move in the gold price since the non-firm payroll data came negative in the last week. The economist researchers were expecting 175 k jobs added to their economy but the actual result was only 156k.Despite the bad nonfarm data the price of gold tumbled hard on the last Friday and closed at 1171.72 level. In the eyes of trained professional, the price of gold might fall further downward in the upcoming week as the investors’ sentiment is extremely positive for the green bucks due to the recent ongoing stable performance from the U.S economy.
Stable sign of recovery in the dollar index: In the last trading week the dollar gained significant amount strength in the global market and pushed all of its major rivals lower. The price gold and silver traded lower due to the recent regaining of the strength of the green bucks in the financial sectors. There has been a sharp rise in the Dollar against the Japanese Yen and it gained about 1.44% securing 117.00 in the financial market. The Great Britain pound suffered an extensive loss in the market and traded at 1.2278 whereas the EURUSD pair dropped by 0.70%.Most importantly the price of the precious yellow matter retreated from a critical resistance level and traded at $1172.60 per ounce in the commodity market. The green bucks remain broadly supported by the investors’ sentiment as the FED has projected three rate hike in this year. If the FED manages to go for a three rate hike then the dollar index will make a new high in the market breaking the current 14 years high. Most importantly the U.S central bank will also pressurize the FED for at least two rate hike before the month of November to readjust their current inflation rate.TO be precise the dollar bulls are waiting on the sideline for the right catalyst to show its immense strength in the market.
Summary: The price of gold has rejected critical resistance level in the market and traded at $1172.60 before the market closing. All the major rivals of the green bucks suffered an extensive loss on the last trading day and investors are now thinking that the dollar bulls are again getting active in the global market. In the upcoming week, we might see fresh buying pressure in the green bucks and the leading investors will be looking to buy the green bucks with perfect price action signal in the market.