STARTRADER Forex: Gold, oil and the US dollar under the influence of the Fed's interest rate hike

Oil prices fell by more than $1 a barrel last Friday, mainly due to the strength of the US dollar and the profit-taking of oil traders after a strong rebound, which also made the benchmark crude oil contract rise for the third consecutive week. However, no matter how strong the dollar is, the fluctuation of crude oil price has always attracted widespread attention in the market. For example, last Thursday, several Libyan oil fields were shut down because a local tribe resisted the kidnapping of a former minister. At the same time, Shell suspended the loading of Nigerian crude oil from kardos because of a possible leak at a terminal. These events have raised concerns about the tightening of market supply in the coming months, which has caused the weekly oil price to rise by nearly 2%. However, no matter how the price changes, we can never hide one thing, that is, the recovery and upward trend of the oil market is always in our expectation.

On the other hand, the fluctuation of oil prices is inseparable from the trend of the US dollar. Before the weekend of market consolidation, the US dollar index rebounded from a 15-month low, which made crude oil more expensive for investors holding other currencies, thus reducing oil demand. However, this is only part of the reason. STARTRADER Xingmai released recent data showing that the inflation data of producers and consumers in the United States in June showed that the price pressure eased, which aggravated the decline of the US dollar this week. And Federal Reserve Governor Waller said that he is not ready to lift the warning of inflation in the United States, and he prefers to raise interest rates further this year. Therefore, we can foresee that the trend of the US dollar will face more variables.

At the same time, the strength of the dollar is also closely related to the price of gold. Due to the fall of inflation in the United States, the price of gold fell back last week, but it still hit a big weekly increase since April, which further increased the expectation that the Federal Reserve would suspend interest rate hikes this month. In particular, recent data show that consumer prices in the United States hit the smallest year-on-year increase in June for more than two years, which triggered market bets that the Fed may soon end its interest rate hike cycle. In this regard, STARTRADER Xingmai said: “If the Fed starts to say that we don't need to raise interest rates further, we will see gold rise further.” However, nowadays, the rising interest rate of American public debt makes non-fruited gold less attractive to investors, which puts the price of gold under downward pressure.

So, how should we deal with these changes？ STARTRADER Xingmai believes that “we may see a slight strengthening of the US dollar in the short term, but it remains to be seen whether the Fed can convince traders that it will raise interest rates twice instead of once on July 26 (the date of the Fed meeting).” Therefore, we must wait for the Fed's recent decision with a calm mind, and at the same time, we should pay close attention to the relevant developments of the G20 finance ministers and central bank governors' meeting.