Gold futures remained below the key $1,800 level on Wednesday and dragged their losses into the second straight session amid pressure from further US dollar strength. According to Gold Newsletter editor Brien Lun; gold, like all markets, is traded on a daily basis based on how traders interpret tea leaves (Federal Reserve) for monetary policy. Has the prediction of the future of gold really turned into fortune-telling? Cryptocoin. com, we have compiled the opinions of the experts for you.

Gold failed to rise despite the below-expected NFP

In the Federal Reserve’s Beige Book on c conditions, published Wednesday afternoon, it was stated that overall growth “slipped to a moderate pace from early July to August”. Following this announcement, the precious metal traded slightly higher than Wednesday’s price levels.

December gold futures were down 0.3% to settle at $1,793.50 an ounce. In electronic commerce shortly after the publication of Beige Book, the contract was traded at $1,794.90. According to FactSet data, gold pricesyellow fell by 1.9% on Tuesday. The sharpest one-day percentage drop for the most active contract since Aug. 9, and the move pushed the contract to the lowest settlement since Aug. Chintan Karnani, research director of Insignia Consultants, commented:

Despite sharp gains in the dollar, expectations that central banks will cut back on asset purchases, and gold’s positive news in the form of lower US August nonfarm payrolls last week, gold’s failure to surpass $1,840 last week caused gold to drop below a key $1,800. This has caused short-term traders to use every spike to exit their gold investments.

There is a fragile balance

The dollar continued to strengthen, putting pressure on the dollar-traded precious metal. The ICE US Dollar Index DXY is up 0.2% at 92.65. Gold market transactions took place against the backdrop of uncertainty regarding the Fed’s monetary policy plans, amid concerns over the delta variant of the coronavirus causing COVID-19, which supported the price movement, and the labor market recovery seemed unstable. Tyler Richey of Sevens Report Research wrote in his Wednesday news release:

The bullish situation for gold is characterized by a very fragile balance between a stable but relatively slow recovery (very hot data causes hawkish money flows) and still compliant central bank policy. So anything that contradicts any of these will weigh on gold in the short run.

“Fed’s September decision will hang on gold”

Meanwhile, weak benchmark bond yields, which could compete for safe-haven flow against the yellow metal, did not provide much support for gold. ActivTrades technical analyst Pierre Veyret wrote in a note on Wednesday:

Despite declines in riskier assets, gold failed to capitalize on the current short-term hedging environment. Investors may want to wait for more signs of any slowdowns before making the decision to move towards safe-havens.

On Friday, gold strengthened with a slight dip in the dollar, but uncertainty about the Federal Reserve’s next move to loosen k support measures has kept some investors on the sidelines. Commerzbank analyst Daniel Briesemann said gold is mostly hovering around $1,800 and many market participants are on the sidelines, partly due to uncertainty surrounding the Fed’s contraction timeline.

The Fed’s decision when it begins to contract will hang on gold.

The next meeting of the Federal Open Market Committee will be held on September 21-22. While non-yielding bullion tends to win when interest rates are low, investors in precious metals are keeping a close eye on cues from the Fed, as some see bullion as a hedge against hyperinflation fueled by massive stimulus. And the signals were mixed with a recent Fed report showing the US “shrinking a bit” in August. But a number of Fed officials said this week that the slowdown in job growth in August will not thwart plans to cut asset purchases this year. UBS analyst Giovanni Staunovo also drew attention to the effect of the Fed’s profits on the price of gold:

Gold continued to trade range-bound and it is the Fed that has had the biggest influence on the price of gold, as the precious metal is primarily looked at in dollar terms.

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Michael Lewis


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