Gold intermarket: Fed, VIX and DXY knocking gold bulls down to size

Gold has been hit hard from $1,340 down to $1,324 so far while DXY has rallied and is looking to make a bottom on the 94 handle.

Gold suffers sharp losses today ahead of the Jackson Hole this week and US GDP that will be the highlight of the month in respect to gauging how the US economy has been performing as we move deeper into H2 and towards territory where the Fed could be expected to hike interest rates. Gold tends to lose demand in an environment where investors can obtain a return on their cash where interest rates are rising and investors will hope for some clarity this week on the near-term path for interest rates. 

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The Fed remains very data-dependent according to the recent minutes, but despite a very mixed economic backdrop according to official data, market speculation continues to factor in a rate hike this September  and a hawkish outcome from the Jackson Hole allowing for a bid in the DXY to 94.75 the high and a drop in gold to aforementioned lows. The probability of a rate increase in December has increased compared with last week and a month ago and that too is lifting USD/JPY higher on the 100 handle, again not so positive for Gold prices and the VIX is also down indicating the markets are less uncertain about an outcome from the Fed this year.  However, any surprises from the Fed and a complete change of tone would support a rally in Gold and many observers are starting to lose confidence in the Fed as a whole.

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