As prices go below $1,800 an oz, the gold market is having a hard time getting its footing. Analysts are expecting to see more pain in the short term.
The gold market continues to digest news that Pres. Joe Biden will re-nominate Powell as the head of the Federal Reserve. After the news was announced, markets had higher expectations that the United States central bank will tighten the interest rates more aggressively next year.
Dec. gold prices are sloping near their session lows, as they’re trading at $1,786.50 an ounce, down over 1% on the day.
Some analysts believe even with inflation pressures remaining supportive for gold, it hasn’t been able to withstand the growing headwinds from increasing bond yields. The 10-year bond yield is currently trading at a 30-day high at 1.66%.
Daniel Briesmann noted that heightened expectations of an aggressive monetary policy action have driven higher real yields.
“We were astonished that the market’s reaction to Powell’s nomination was so strong. After all, the Fed’s future monetary policy path is not likely to change with Powell in charge,” he stated.
Briesmann stated that he was trying to see if support would hold above gold’s 100-day and 200-day moving averages, which both were at just below $1,800 an oz.
“Just yesterday morning, we had cautioned that gold’s price increase was on shaky ground,” he stated.
Ole Hansen, leader of commodity strategy at the Saxo Bank, mentioned it is hard to see when this new selling pressure will come to an end. He said that hedge funds and money managers had built up their speculative bullish betting in the last two trading weeks, following the new U.S. inflation data, which showed a yearly rise of 6.2%, the largest jump in 31 years.
“There’s no point in searching for levels until the speculative long liquidation has ended,” he stated. “Unfortunately, it looks as though we have a ways to go before ends. From a technical point of view, I will worry a lot more if it breaks under 1781.”
Ipek Ozkardeskaya, high level analyst at the Swissquote Bank, said that she believes gold prices will keep struggling as interest rates move higher.
“Because north is the only feasible direction for the United States yields, gold will likely stay under the pressure of higher yields, and the United States dollar might again be a better safe haven if we see any selloff throughout the equities as well,” she stated.
Author: Blake Ambrose