Gold aims to show a fourth consecutive weekly decline. The pressure on bullion is exerted by the increasingly hawkish appearance of the Fed. It seems that the main intrigue of the year is close to the end.
After a 2-day rise, the yellow metal ended trading on Thursday with a fall, unable to compete with a stronger US dollar. The greenback received support from different sides yesterday and strengthened by 0.4%, reaching 96.245 points.
Against this background, the precious metal plunged by 0.5%, or $ 8.80. At the close of the COMEX NYSE, the asset was trading at $ 1,776.70.
The main factor that turned out to be negative for gold, and positive for the dollar, was the easing of concerns about the new COVID-19 strain.
"Reducing coronavirus risks has dulled the demand for a safe-haven asset. Traders have not increased their investment in gold", analyst Chintan Karnani commented on the situation.
Another factor that yesterday acted as a support for the US dollar and a barrier for gold is the publication of new data from the US labor market.
The weekly report of the US Department of Labor showed a significant decrease in the number of applications for unemployment benefits. According to the results of the last seven-day period, the indicator fell by 43 thousand and reached a 52-year low of 184 thousand.
Analysts believe that the weakening of panic about Oomicron, as well as the steady recovery of the US labor market, are very powerful triggers for the Fed's transition to a more aggressive normalization of its current rate.
The Fed's monetary policy meeting will take place on December 14-15. Investors expect that the regulator may announce an acceleration of the reduction in bond purchases at this meeting.
The economists' forecast of inflation rates adds confidence that the central bank will begin to force events. The US consumer price index for November will be published today. Experts suggest that the indicator increased by 0.7% compared to the previous month.
C. Karnani said that the inflation rate is a key benchmark that determines the direction of the policy of each central bank in relation to interest rates. He also added that the Bank of England and the ECB will also hold meetings next week.
The expert believes that the British regulator will soon abandon the expected rate hike due to the rapid spread of a new strain of coronavirus in the United Kingdom.
According to Reuters, the European Central Bank is considering a plan to temporarily increase the purchase of assets. However, this scenario still provides for a significant reduction in the volume of debt repurchased starting in March, as soon as the larger anti-pandemic incentive program is completed.
As for the Fed, most analysts are inclined to believe that the current conditions contribute to the transition to a more hawkish strategy. And if today's report shows another jump in consumer prices in the US, the US central bank is very likely to give gas at its upcoming meeting.
"Market expectations about the acceleration in the rate of decline in asset purchases are strengthening. More and more traders believe that the first rate hike may occur as early as May. Against this background, gold is experiencing great difficulties," analysts at TD Securities said.
Since Monday, the precious metal has fallen by 0.4% and is heading for a fourth consecutive weekly decline. Experts draw attention to the fact that currently gold cannot find a single powerful growth impulse. Even the Chinese factor, which traditionally supports bullion prices, is bursting at the seams now.
On Thursday, Fitch Ratings downgraded the notorious company from the Celestial Empire Evergrande due to non-payment of coupons on bonds and actually recognized its "limited default". The situation with Evergrande is jeopardizing the Chinese real estate market and the overall economy of the country, which is the second largest in the world.
Experts believe that deteriorating financial stability in China may affect estimates of demand for gold, while China is one of the world's largest importers of the precious metal.