By FX Empire.com
Gold prices remained under pressure on Tuesday, as the U.S. dollar gained strong momentum amid the ongoing pessimism that continued to dominate global financial markets, where Greek Prime Minister George Papandreou surprised markets by calling a referendum on the bailout package that was approved last week by EU leaders. Moreover, the failure of MF Global Holdings continued to weigh down on confidence, as traders sold higher yielding assets and targeted lower yielding ones, which provided the U.S. dollar with strong bullish momentum that pushed gold prices lower.
Moreover, the Institute for Supply Management released the manufacturing index for the month of October, where the ISM manufacturing index eased to 50.8 from the prior estimate of 51.6 and below median estimates of 52.0, the worse than expected expansion in the manufacturing index also spread jitters across markets over the outlook for growth in the world’s largest economy.
The outlook for gold remains generally to the upside, however, we still expect volatility to continue to dominate gold prices over the short term, and that could still weigh down on gold prices, but overall, our general outlook for gold prices remains to the upside. Trader will be following the FOMC’s rate decision on Wednesday, where some believe the Fed could embark on another round of quantitative easing, although recent fundamentals from the United States suggest the Fed will keep the monetary policy unchanged, which is a view shared by most analysts, since most of them believe it would be premature to embark on QE3 one month after announcing “Operation Twist”. Traders will be also eyeing the ADP employment change on Wednesday for hints ahead of Friday’s infamous jobs report.
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