Here’s what you need to know on Wednesday, December 31:
The highlight of the day was the minutes from the December Federal Open Market Committee (FOMC) meeting released in the afternoon in the US. The minutes showed that most participants are willing to offer additional interest rate cuts if inflation declines over time. The document also showed that economic growth is expected to move modestly faster than at the October meeting.
The US Dollar Index (DXY) is trading in the 98.20 price zone on Tuesday, up 0.2% for the day as the market digests the Federal Open Market Committee (FOMC) minutes released earlier today.
US dollar price today
The table below shows the percentage change in the US Dollar (USD) against the major currencies listed today. The US dollar was the strongest against the British pound.
| US dollars | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollars | 0.16% | 0.25% | 0.19% | -0.03% | -0.10% | 0.14% | 0.22% | |
| euro | -0.16% | 0.09% | 0.04% | -0.19% | -0.25% | -0.03% | 0.06% | |
| GBP | -0.25% | -0.09% | -0.04% | -0.28% | -0.35% | -0.13% | -0.05% | |
| JPY | -0.19% | -0.04% | 0.04% | -0.23% | -0.29% | -0.09% | 0.05% | |
| Canadian | 0.03% | 0.19% | 0.28% | 0.23% | -0.05% | 0.19% | 0.24% | |
| Australian dollar | 0.10% | 0.25% | 0.35% | 0.29% | 0.05% | 0.22% | 0.30% | |
| New Zealand dollar | -0.14% | 0.03% | 0.13% | 0.09% | -0.19% | -0.22% | 0.08% | |
| Swiss franc | -0.22% | -0.06% | 0.05% | -0.05% | -0.24% | -0.30% | -0.08% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select USD from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Gold: The yellow metal is trading above $4,350 on Tuesday, trimming a quarter of its weekly losses after bottoming at $4,300 on Monday. The XAU/USD pair fell sharply after hitting an all-time high of $4,550 at the beginning of the week, due to profit-taking ahead of the New Year holiday.
EUR/USD: The pair is trading near the 1.1750 area at the time of writing, with the market currently calm as we head into the New Year holidays. The US Federal Reserve is expected to cut interest rates between one and three times next year, helping to keep the pair afloat before the end of the year.
GBP/USD: Trading around 1.3470 on Tuesday, consolidating after rising to its highest level in more than three months near 1.3530.
USD/JPY: It is trading near the 156.40 price area as the US dollar regains some strength after the release of the FOMC meeting minutes.
The AUD/USD and USD/CAD pairs ended the day almost unchanged.
Most financial markets will remain closed on Wednesday due to the New Year holiday.
Frequently asked questions about gold
Gold has played a major role in human history as it has been widely used as a store of value and a medium of exchange. Currently, apart from its luster and use in jewellery, the precious metal is widely viewed as a safe haven asset, meaning it is a good investment during turbulent times. Gold is also widely viewed as a hedge against inflation and currency depreciation because it is not dependent on any specific issuer or government.
Central banks are the largest holders of gold. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and purchase gold to improve the perceived strength of the economy and the currency. High gold reserves can be a source of confidence for a country’s solvency. Central banks added 1,136 tons of gold worth about $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest annual purchase since records began. Central banks in emerging economies such as China, India and Turkey are rapidly increasing their gold reserves.
Gold has an inverse relationship with the US dollar and US Treasuries, which are major reserve assets and safe havens. When the value of the dollar declines, gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rise in the stock market tends to weaken the price of gold, while a sell-off in riskier markets tends to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession could cause the price of gold to rise rapidly due to its safe-haven status. As a lower-yielding asset, gold tends to rise as interest rates fall, while a higher cost of money usually negatively impacts the yellow metal. However, most of the moves depend on how the US Dollar (USD) behaves as the asset is priced in Dollars (XAU/USD). A stronger dollar tends to keep the price of gold in check, while a weaker dollar is likely to push gold prices higher.
