Gold Falls Amid Fed Policy Uncertainty

Gold (XAU) and other Commodity prices fell on Monday morning following the release of improved U.S. employment numbers. As the trading day began on Monday morning, Gold fell by 0.9%.

After last Friday’s release of U.S. employment numbers for July, many traders may be confronting uncertainty regarding possible changes to the Federal Reserve’s economic policy. This latest jump in American employment numbers greatly outpaced experts’ expectations, and may show signs of economic recovery from last year’s pandemic-related recession. 

Some market watchers are beginning to suspect that the Fed will soon begin to back off from its unprecedented economic stimulus. The improving economy and rising inflation numbers have led some important economic players, such as the President of the Dallas Federal Reserve, Robert Kaplan, to opine that the Fed should cut down on asset purchases. Furthermore, concerns about a sooner-than-planned interest rate hike have also been stoked by this positive economic data. 

In March, following the Federal Reserve’s decision to keep interest rates close to zero until 2023, Gold and Silver prices rose, given their potential attractiveness as a hedge against inflation. Now that the economic indicators have changed direction, investors may be feeling less confident about investing in purchases of precious metal.

On Monday morning, Gold fell by 0.9%, following Friday’s drop of over 2.2%. Silver (XAG) experienced an even sharper price fall as investors digested last week’s job numbers; on Friday, Silver fell by over 3%, followed by a further 2% drop on Monday morning. Platinum (PL) fell by nearly 2.5% on Friday and almost 0.7% on Monday morning  as well.

Reduced Demand Pushes Oil Prices Down

The U.S.’s economic recovery may have also affected the prices of other Commodities. Perhaps due to the strengthening U.S. Dollar as well as fears that the spreading COVID-19 virus’ Delta variant could keep demand low in Asia, Oil prices have been falling as well. China, the world’s second-largest consumer of petroleum by volume, has been especially influential on Oil price volatility. Delta’s spread throughout Asia has led to dozens of flight cancellations as well as travel restrictions in many Chinese cities, during the season when citizens would normally be taking their summer holiday. 

The loss of this strong demand for Oil has exerted significant downward pressure on market prices. On Monday morning, the price of Brent Oil (EB) was down by over 1.8%, while Crude Oil (CL) dropped by over 3%. 

Although rising U.S. employment may bode well for the economic recovery as a whole, it remains to be seen whether a possible shift in the Fed’s monetary policy will affect Commodity prices going forward.