Harvest Global Markets :

Aggressive interest rate hikes by Federal Reserve Bank have pushed up the opportunity cost of holding the precious yellow metal. Over the last ten months, the U.S has witnessed a 300 basis points increase in its inter-bank rate. The current federal rate stands at 3.25%.

After the release of positive Non-Farm Payroll data, the market increased the probability of another 75 basis point rise in interest rates in November 2022. Non-Farm Employment improved by 263,000 against a forecast of 248,000. Currently, the futures market has assigned a 90% probability for the interest rates to hit 4.00% in the coming month. Rising probability surged the dollar index to 113.48 today, and it is anticipated that the greenback may surpass the two-decade high of 114.75. The merry dollar index forced the gold futures prices down to $1672 per ounce from a high of $1707 yesterday. The gold futures contract is currently trading at a price of $1670 (1430 HRS PKT).

Another factor that has given the safe haven appeal to the dollar index is the escalation of the Russian-Ukraine War. After the indiscriminate wave of Russian missile strikes, the situation has started to appear gloomy, and nervous investors are seeking refuge in the currency with the highest rate of return-USD.

Moreover, investors have eyes on the U.S inflation data that will be released by October 13th at 1730 HRS PKT. The market forecast monthly inflation to surge by 0.2% (last month’s data recorded a rate of 0.1%). The inflation data could set a further stage for another fierce monetary policy. Although the yearly inflation rate is predicted to contract to 8.1% from 8.3%, Federal Bank will not consider any leniency in monetary policy until the U.S economy depicts a substantial plunge in the general price level.

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