By Barani Krishnan
Investing.com - Has the gold/dollar inverse trade broken down?
Yes, at least in the immediate term, as futures of the yellow metal and bullion both decoupled from the resurgent dollar to push higher on their own Tuesday.
Gold for December delivery on Comex settled New York’s regular trading session up $8.90, or 0.5%, at $1,943.20 per ounce. It was the first positive close in five days for the benchmark gold futures contract.
Last week, December gold lost $40, or 2%, after an unexpected surge in the dollar that carried through to Tuesday as the euro weakened ahead of this week’s European Central Bank meeting.
The spot price of gold, which reflects real-time trades in bullion, was at $1,931.97 by 3:00 PM ET (19:00 GMT) Tuesday, showing a gain of $3.50 or 0.2%.
The Dollar Index, which pits the greenback against six major currencies and serves as a contrarian trade to gold and most other commodities, rose 0.8% to a near one-week high of 93.468. The U.S. 10-Year Treasury note, meanwhile, slumped 5.4%, making the dollar’s rally more notable.
The ECB meets Thursday and most analysts don't expect a change in its policy. Still, markets are looking to Europe’s apex bank for a message on inflation forecasts and to determine if the euro had been stronger than thought. The single currency marked a two-year high just above $1.20 at the beginning of the month, until comments about its level from ECB Chief Economist Philip Lane knocked it lower.
Whatever the case, the apparent breakdown in the dollar-gold correlation — at least in Tuesday’s regular session of Comex — surprised some.
“A stronger dollar and broad market selloff that continues a scramble for cash was unable to send gold below the $1,900 level and that could be a good sign for bullion bets,” said Ed Moya, an analyst at the New York-based online trading platform OANDA.
He, however, added: “Gold, by no means, is in the clear and the $1,900 level will be key to hold this week.”