RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Gold is unique among commodities as prices react to specific scheduled announcements. In the United States, interest rate decisions and weekly economic indicator reports, most definitely influence gold’s rise or fall. Gold also plays the traditional role as a safe-haven and store of value for concerned investors. The fact that scheduled economic data is released in advance makes the gold price sensitive to fluctuation. Commodities are not financial assets, but interest rates can have a significant effect on commodity prices. It is the strongest and most consistent relationship is between the U.S. dollar and commodity prices. It has been studied that “bad news,” (for example data indicating weaker-than-expected growth) has a larger impact than “good news”. GDP and labor market data has a significant affect during times of high market uncertainty. A number of key U.S. indicators, including inflation, GDP, and employment statistics, consistently show the ability to move commodity prices by economists who study such data. Gold is also a hedge against higher inflation and economic uncertainty. For example, gold prices tend to rise if U.S. inflation output unexpectedly increases. Gold is also sensitive to news regarding supply and demand. When central banks announce they are selling gold reserves, prices decline.

Susan Green