As Ole Hansen Head of Commodity Strategy for BG Saxo points out, gold has suffered its biggest drop in five months. “Although no rate hike is expected before 2023, the fact that the Fed suddenly signalled a willingness to consider tightening was something that unprofitable investment metals took into account and as a result, gold, already on the defensive after being pushed back above $1900, veered lower.”
Gold, which had not traded consistently in the days leading up to yesterday’s FOMC meeting, slumped due to simultaneous movements in the dollar and yields.
Gold remains the most sensitive commodity to interest rates and the dollar, and while the latter reached a two-month high, it was the movements in Treasury yields that spooked the market.
While dollar strength will be a challenge, gold should be able to sustain rising yields as long as it is driven by rising inflation expectations. This, however, is not what we saw yesterday, so once again the million-dollar question is, “Will inflation be a passing phenomenon or more lasting?”. For now, the market is trusting the Federal Reserve’s judgement and until the data potentially proves them wrong, gold, and with it silver, could face another difficult period.
According to analysts at Mps Capital Services, gold prices have punctured various short-term supports, falling below $1,800. This is a negative technical signal as prices have returned below the old bearish trendline that connected the historical highs with those of 2021.
A positive factor is that gold is still trading above the long-term bullish trendline which passes around 1724. Analysts point out that just below it there is also an important static support at 1706, so the holding of these two levels becomes particularly important to avoid the end of the uptrend that would be confirmed by a descent below 1676 dollars.
2 Comments
Paolo trader
Siete in assoluto il migliore provider di segnali Forex
Eddie
Thanks Paolo for your support!