As we reported , gold is poised for its second weekly rise on Friday as central banks’ expectations that central banks may begin to cut k support are backing up by a weaker dollar to offset the pressure from higher US bond yields. Spot gold prices in yellow were up 0.56% daily at $1,792.98 at the time of writing, while US gold futures were up 0.68% at $1,794.20.
“Money entering gold heads towards the exit door at the first sign of trouble”
Gold prices are on the path of gains for the second week with the support of the weak dollar which has been lower this week. A lower dollar makes gold more attractive to buyers of other currencies. Jeffrey Halley, senior market analyst at OANDA Asia-Pacific, comments:
Gold may struggle to hold above $1,800 as it continues to pursue a series of higher lows and looks set to prepare itself for another $1,800 test. While gold is rallying strongly these days, most of the flow seems to be at the mercy of the fast buck-seeking momentum. Unfortunately for gold, this coin is headed for the exit door at the first sign of trouble.
Hitesh Jain: Gold prices are yellow, not looking good in the long run
The sharp rise in the yields of 10-year US Treasury bonds this month also increased the opportunity cost of the interest-free precious metal, limiting the upside potential of gold. Adollarsanta US Federal Reserve Chairman Raphael Bostic said he expects high inflation to continue into 2022 and that the central bank should raise interest rates by the end of next year.
Gold is often considered an inflation hedge. However, reductions in incentives and increases in interest rates increase government bond yields, reducing the attractiveness of bullion. Hitesh Jain, principal analyst at Mumbai-based Yes, expresses his views as follows:
The global will be very stable given strong household consumption and strong corporate earnings. On such a backdrop, I don’t see gold doing well in the long run.
Gold continues to struggle, according to Christopher Lewis
Market analyst Christopher Lewis states that gold markets rallied a little in Thursday’s trading session, but continues to see resistance on the downtrend line. The analyst also reminds us that we are sitting just above the 200-day EMA supported by the $1,805 level, which he thinks will be the type of level that basically defines the trend. Christopher Lewis points out the following levels in his analysis:
I expect short-term rallies as long as we stay there. If we break above this level, we could probably look at the $1,835 level. At this point, the market could start a much larger uptrend, but I don’t believe that will happen at the moment.
According to analyst Christopher Lewis, one of the problems is that interest rates continue to rise in the US, thus putting downward pressure on gold in general. “After all, paper is easier to hold than physical gold. That’s why many big companies will do this,” says the analyst, therefore, he thinks that gold continues to struggle and states that it is more likely to be a seller than anything else. The analyst continues his assessment with the following statement:
The downside is that the $1,750 level is a possible target. But a break below this level pushes things towards the bottom of the recent move. Gold will continue to be noisy. On the other hand, this is nothing new as gold markets are very sensitive to the interest rate scenario. At this point, it seems likely that the market will continue to fluctuate.