Gold markets have fallen again during the trading session on Monday, as the US dollar continues to strengthen against everything. Gold is particularly sensitive to the US dollar and US monetary policy, so it’s not a huge surprise to see that the market has in fact fallen to fresh, new lows. The $1680 level now appears to be a short-term ceiling, where we had seen a lot of market memory previously. After all, it was the scene of a double bottom, that was just broken through about a week ago.
Is Gold Headed For a Fall Today?
At this point, it’s very likely the gold will try to find its way to the $1600 level, and then even lower than that. I would not be surprised at all to see this market reached the $1500 level over the longer term, with every rally between here and there ending up being nice selling opportunities. I do believe that exhaustion will be jumped on, as we have broken a major support level over the last week or so. In fact, that support level went back a couple of years, so I do think that this is a major move just waiting to happen.
The only way that this changes is if the Federal Reserve changes its monetary policy. I do not see that happening, so therefore as long as Jerome Powell remains hawkish, gold will remain very bearish. Interest rates continue to climb around the world, so it’s not just the US dollar thing, it is an interest rate play overall. After all, it’s much easier to buy a bunch of pieces of paper then it is to store physical gold which is expensive. If you get some type of positive carry in the bond market, it makes much more sense to do it that way instead of sitting on an asset that has negative carry.
Summary
- It’s not until we break above the 50-Day EMA at the $1720 level that I would take a rally seriously, and even then I would need to see some type of central-bank repositioning globally.
- Right now, everybody is in the business of fighting inflation, and I do think that we have a huge flush coming in this market given enough time.
- That’s probably true with most markets, and gold of course won’t be any different in this regime.
Ready to trade our Gold prediction today? Here’s a list of some of the best XAU/USD brokers to check out.