Easy monetary policy tends to affect gold, as the Chinese central bank said on Wednesday that it will reduce the amount of cash that all banks must hold as reserves, which frees money to support the slowing economy.
Gold futures rose on Thursday, shortly before the regular session opened. The market is currently trading within a wide range since last Tuesday, indicating volatile investors and expectations of imminent fluctuations.
On the last day of 2019, gold prices reached their highest level since October 3. Technical factors may also contribute to slowing trading today. The market is currently trading within a 50% to 61.8% retracement range from the September to November price range. The reaction of traders in this region can determine whether the market challenges are high in the past year or re-test bottoms from the decline in the near term.
Earnings are likely to be limited on Thursday due to the stronger USD.
The effect of the US dollar
The US dollar has been under pressure against a basket of major currencies since the United States and China announced the first phase of a trade deal on December 13. Dollar investors are giving up the US currency that was bought as safe protection against the escalation of the trade war. The weakening of the US dollar is helping to increase the demand for dollar-denominated gold.
On Thursday, investors have had the opportunity to respond to the latest US reports on job cuts, weekly unemployment claims and the final PMI manufacturing.
Weekly jobless claims are expected to reach 222,000, matching last week’s figure. The final Manufacturing PMI is expected to come at 52.5.
Friday may be a moving day in the market with the ISM manufacturing PMI report and it is expected to come to 49.0 slightly better than the 48.1 previously reported.
The Fed will also release the minutes of the December meeting. Traders hope the minutes will reveal whether the Fed will cut interest rates in March. Not because the economy needs it, but rather as a security against an unexpected downturn.