Gold price techniques “look awful”: metal’s worst enemy hangs over potential recovery – analysts



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(Kitco News) The price of gold could continue to struggle under the weight of its worst enemy – the US dollar – until an official cutback announcement is made by the Federal Reserve, analysts say.

After losing nearly $ 100 in August, gold will need time to stabilize and find its new support levels.

“The technical data looks awful for gold, but if prices could stabilize between $ 1,700 and $ 1,750, it could allow some longer-term investors to pull back,” said Edward Moya, market analyst principal of OANDA. “Gold’s worst enemy is a stronger dollar, and that could remain the theme until the Fed officially announces the cut. Traditionally, when the cut begins, it should be bullish for the good guys. of the Treasury and therefore favorable to gold. “

In the near term, there are a lot of hurdles for gold to overcome, including more talk from the Fed, with markets paying close attention to any evidence of reduction. That could limit the rebounds, said Daniel Briesemann, analyst at Commerzbank.

“Gold is likely to face further headwinds in the near term: more US Federal Reserve officials have now spoken out in favor of ‘tapering’ in the near future,” Briesemann said. In the current market environment, we believe gold will struggle to recoup its losses anytime soon. “

Atlanta Federal Reserve Chairman Raphael Bostic already said on Monday that the Fed could start cutting back on asset purchases as early as the last quarter of 2021 amid strong employment growth.

Many analysts blamed the low liquidity environment for the flash gold crash early Monday morning.

“According to the Bloomberg News Agency, more than 3,000 futures contracts worth more than $ 500 million were traded in the space of a minute, which is too much for the market, which is characterized by generally by a low level of liquidity at this time of day. ” Briesemann explained.

However, the overall trigger for the decline was a stronger than expected employment report, which was released on Friday.

“As expectations grow that the Federal Reserve will tighten monetary policy sooner than expected, investors have shed the precious metal, sending prices to levels never seen in five months,” said Lukman Otunuga, analyst main research center of FXTM.

Gold’s pattern remains quite bearish, Otunuga added. “Sustained weakness below $ 1,760 may cause a decline to $ 1,700 and below. Alternatively, a break above $ 1,760 could trigger a move towards $ 1,792 and $ 1,800.”

December’s Comex gold futures were last traded at $ 1,729.80, up 0.19% on the day.

The precious metal needs some resilience if it is to stop selling at around $ 1,700 an ounce, said Nicky Shiels, head of metals strategy at MKS PAMP GROUP.

“Initially, we thought we wouldn’t encounter a repeat of the taper tantrum of 2013 where gold fell $ 300 in a matter of days, but given the disappointment over its inability to recover on real rates, it probably needed a sentiment / hope wash and some positioning, ”Shiels said. noted Monday. “This post-NFP [nonfarm payrolls] The move strangely resembles the April 2013 price review. We still think a repeat of 2013 is unlikely to that extent, but conviction wanes as gold is now technically broiled and requires some resilience to avoid some. key levels. “

A key level to maintain from now on is $ 1,675 an ounce, with new resistance at $ 1,750 an ounce, Shiels added. “There is a triple bottom at $ 1,675 / 80, and a break of that amount opens $ 1,550, then $ 1,450 ($ 1,450 is late 2019 low and initial COVID low in March 2020). , a rally of $ 1,750 would help build confidence (and delay a move lower).

All eyes are now on other incoming data, including the latest US inflation figures, which are expected to be released on Wednesday. Gold investors are also closely monitoring the evolution of the COVID-19 delta variant.

Until then, the dollar will continue to be the dominant driver of gold. At the time of writing, the US dollar index was trading around 93.

“The next few days could see increased volatility thanks to numerous speeches by Federal Reserve officials and the highly anticipated US inflation report,” Otunuga warned. “Further signs of rising inflationary pressures could give dollar bulls a renewed sense of confidence as expectations escalate over the Federal Reserve’s shift in outlook. On the other hand, if inflation cools down , it can reduce some pressure on the Fed to act, potentially lowering the dollar. “

Warning: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes. This is not a solicitation to trade in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and / or damage resulting from the use of this publication.

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