Why Is Gold Down Again Today?

(Kitco News) Golden is looking to wrap September down nearly $ninety, and analysts are warning of a possible washout if aureate tumbles below $ane,700 an ounce.

The two-punch combination of surging U.S. Treasury yields and a higher U.S. dollar is pressuring gold down amid inflationary fears and risk-off sentiment in the market, according to analysts.

At the fourth dimension of writing, Dec Comex gold futures were trading at $1,725, down 0.72% on the day, while the U.S. dollar index was at 94.36, upwards 0.64% on the day, and the U.S. 10-year Treasury yield was fetching 1.541%.

"The yields and the dollar are the major part of information technology. At that place is an inverse correlation between college yields and metals. When yields are popping, metals are down, and the USD is upwardly," RJO Futures senior commodities banker Daniel Pavilonis told Kitco News.

Gold is "only hanging in there," Pavilonis said, noting that if the precious metal falls beneath $1,673, the market could encounter a washout to $1,550 an ounce.

Considering the U.S. dollar index bound, golden is holding upwardly pretty well, said MKS PAMP GROUP caput of metals strategy Nicky Shiels.

"Golden is currently sitting at $ane,730 (aforementioned level when Bitcoin hit its $60K peak and all the furor was about cryptos, less so precious). The ever-important $one,675 handle (triple lesser just as well virtually where the bulk of ETF holders are long at) is nearby. Beyond that, $1,560 is where golden has technically erased all 'COVID premium' (a stretch we believe)," Shiels said on Wed. "Gilded needs to reclaim an erstwhile floor ($ane,750) before 50DMA is in view ($1,786)."

After the Fed Chair Jerome Powell signaled that tapering could brainstorm in November and end by the heart of next twelvemonth, all the near-term risk-off sentiment has gone to benefit the U.S. dollar and not aureate, Shiels pointed out.

"Whatever about-term uncertainty (over debt ceiling, Feds taper, inflation worries, China etc) has and then been channeled into the safety of the United states$ alone, which is the dominant driver behind the persistent pressure in Gold & Silver," she said.

And a significant repricing of the U.S. dollar to the upside could lead to a bigger selloff in gold, Shiels added. "If the electric current repricing in rates & USD$ continues, putting real yields out of the negative territory, and the USD$ back near COVID highs (which would be a massive motility…), that implies Golds fair cost is in the $one,450-$1,470 range."

With the x-twelvemonth Treasury yield looking at a motility towards 1.threescore%, gold is on "sparse ice," said OANDA senior market analyst Edward Moya.

"The $i,700 level seems imminent for bullion, with many traders eyeing the March lows ahead of $ane,670 equally critical support. The reset of inflation expectations has not benefited aureate prices at all, in fact, it has been the chief commuter for Treasury yields," Moya said. "If gold tin prove signs of stabilizing, then longer-term investors will render and bet on the 2022 global economic recovery that will ultimately lead to a weaker dollar."

Despite all of this, there are still gold bulls out there who cite massive coin press. Just the precious metallic is not responding with a higher price target.

"Gold is an inflationary hedge," said Pavilonis. "Simply rates are going higher, which steals the rationale why gold would get upwardly. There volition come the signal when rates are not loftier enough to hedge inflation. And the cat could be out of the bag towards the stop of the year or by the middle of side by side twelvemonth."

Besides, the good news for precious metals investors is that gold's inverse relationship to higher yields won't last forever, co-ordinate to Pavilonis. "Tapering is not raising rates, and if the Fed rejects the notion of raising involvement rates for longer, there is a possibility in that location will be a mismatch with actual aggrandizement," he said.

This year, the Federal Reserve has worked very hard to create a psychological narrative that aggrandizement is temporary and the market believes it, Pavilonis noted. But the coming energy crisis and longer-lasting supply bottlenecks are questioning that blazon of thinking.

"We are seeing this in natural gas, cotton, and going to see that in grains again shortly. I don't recall this is temporary. This is the beginning of larger waves to the upside," he said.

Disclaimer: The views expressed in this commodity are those of the writer and may not reverberate those of Kitco Metals Inc. The writer has made every endeavour to ensure accuracy of data provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article exercise not have culpability for losses and/ or damages arising from the utilise of this publication.

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Source: https://www.kitco.com/news/2021-09-29/Why-is-gold-down-90-this-September-Analysts-eye-price-risks-below-1-700-an-ounce.html

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