Since the announcement from the Federal Open Market Committee in the United States of an unchanged monetary policy, the US dollar has gained in strength and seen a reversal in the upwards trend in gold. The main culprit however is comments from policymakers, which have led to further strengthening of the US currency after the originally dovish FOMC rhetoric was rejected in favor of a return to rate-hike support. The rocky start of this year had Fed policymakers hold rates amid turbulence in financial markets and a slowdown in China’s economy, but continued fundamental advancement and the strength of the labor market has seen sentiment shift. Final results on the country’s Gross Domestic Product saw growth of 1.40%, after preliminary numbers printed at 1.00%, boosted by consumer spending rising more than anticipated.
After rallying to $1283.82 at the start of the year, gold dropped to $1208.27 upon the first of many such remarks from President of the St. Louis Federal Reserve James Bullard that the central bank could hike as early as April. The FOMC convenes on April 26 for its next policy announcement. Also likely to influence the dollar and gold equation will be Janet Yellen’s speech addressing the Economic Club of New York on Tuesday, where it is expected the Chairwoman will elaborate on the decisions made during the last monetary policy meeting. Reports coming this week that will impact policy’s trajectory are the long-awaited Nonfarm payrolls, preceded by ADP’s numbers with both expecting around 200,000 jobs added. A figure higher than expectations will add to the dollar’s strength and gold’s weakness.
