Gold Takes Cues From US Equity Indexes Despite USD’s Whims


Another dose of hawkish comments from Fed speakers has sent markets cautious, including the bullion markets.

Gold prices fell around 0.5% on yesterday, putting its initial rally, which started last week, on hold and taking the yellow metal nearly 6% higher after touching the lowest levels since April 2020.

Bulls have benefited from the different market sentiment direction, seeing traders pile into equities as they ditch the infamous US Dollar. Bond traders have also helped to drag yields lower, increasing the tailwind for the non-interest-bearing asset.

Despite a valiant intraday effort, US equity indexes ended the day with losses. The benchmark S&P 500 index closed 0.2% lower, while the Nasdaq-100 Index posted a 0.08% loss. Were it not for the increase in crude oil prices that boosted the energy sector, the selloff of the indexes would have been much more pronounced. The S&P 500 GICS energy sector gained 2.08%. Eight of the index’s eleven sectors were negative.

Gold prices currently have a healthy relationship with US equity indexes, which are largely at the whims of Federal Reserve rate hike bets. XAU traders might take their cues from the S&P 500. Asia-Pacific stocks, excluding China, are bucking the overnight bearish trend. That is giving XAU a small lift as prices trade just above 1720.

Equity markets may not have much steam left. Overnight index swaps appear to be more generous, pricing in a small chance for a cut by next March.

The US non-farm payrolls report due out Friday can sway market sentiments towards the USD. Fed speakers Mester and Kashkari are scheduled to speak on Thursday. The market might be volatile next 48 hours for every financial instrument, including gold prices.

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