Gold in danger of fresh breakdown
Investors are staying away from gold because of rising bond yields and a very strong US dollar. Gold also costs money to store, making it even less appealing from an investment point of view in the current climate. Today the precious metal has broken another support in the 1655area. A week earlier, had plunged below key long-term support around the $1676 to $1680 area. The path of least resistance is to the downside and we would concentrate on looking for bearish setups around old support levels.
Going forward, it is all about when the interest rate hikes will be fully priced in. Until this happens, it is unlikely that gold will be able to shine very brightly. How quick the markets will price in rate hikes depends pretty much on incoming data, especially inflation figures. The US dollar and bond yields thus remain supportive for now until there’s evidence of inflation coming down sharply. Perhaps prices could come down in the event of a sharp economic downturn, causing demand to weaken. For that reason, other macroeconomic pointers will also be important to watch closely.
By Fawad Razaqzada on behalf of FOREX.com
Going forward, it is all about when the interest rate hikes will be fully priced in. Until this happens, it is unlikely that gold will be able to shine very brightly. How quick the markets will price in rate hikes depends pretty much on incoming data, especially inflation figures. The US dollar and bond yields thus remain supportive for now until there’s evidence of inflation coming down sharply. Perhaps prices could come down in the event of a sharp economic downturn, causing demand to weaken. For that reason, other macroeconomic pointers will also be important to watch closely.
By Fawad Razaqzada on behalf of FOREX.com
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