As gold prices tumbled in volatile trade on Tuesday as gold prices were capped by a stronger dollar and gains in US Treasury yields, investors await the speeches of Federal Reserve policymakers for more clues on a strategy to cut their bond buying. Spot gold fell to $1,738. Meanwhile, analisdollarser shared its predictions for the precious metal.
OANDA analyst: Wide view not so good
David Meger, director of metals trading at High Futures, said: “We have some concerns keeping the safe-haven offer alive in the downturns. “But we continue to see the dollar gaining and putting some pressure on commodities, especially precious metals.” Benchmark 10-year U.S. Treasury yields rose to a three-month high as the dollar rose 0.1 percent against its rivals, making gold more expensive for other currency holders.
The market focus will be on the speeches of Fed officials this week, including Chairman Jerome Powell, who will testify before the US Congress on the central bank’s policy response to the pandemic. “Whenever any Fed official speaks, we would like to get a little more information,” Meger said. At this point, the expectation is that the Fed will announce that they will start reducing their bond purchases at the next meeting,” he said.
Gold is generally considered a hedge against higher inflation, but a Fed rate hike will increase the opportunity cost of holding non-interest-paying gold. Investors have also been keeping an eye on developments surrounding debt-laden Evergrande after the Chinese real estate giant missed its bond payment deadline last week. “Gold may see some rebound in the short term, but the broader outlook is not so good,” OANDA analyst Craig Erlam said in a note.
TheTechnicalTraders strategist: Next year could be a huge year for gold
Meanwhile, TheTechnicalTraders. com chief market strategist Chris Vermeulen said that both Bitcoin and gold prices need to stay more in the consolidation phase before moves to all-time highs take place. In a recent interview, the strategist used the words “wait for more pain before big gains” in gold and Bitcoin and added:
I think he’s trying to build a golden foundation. I think by the end of the year it will try to stay in a range before $1,700 and $2,000 here and next year could be a very big year for gold.