Gold is near the 1896.00 mark as of this writing and its downturn since the 18th and 19th of July has become pronounced. Gold is trading in direct correlation to the strong USD, except gold is trading in the opposite direction. Having broken below the 1900.00 will prove to be important for the precious metal; gold is now trading below depths it traversed in late June. In early May of this year gold traded near the 2080.00 USD level.
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Nervous investors have sought safe havens in the past few weeks, and surprisingly gold has not been one of the places large investors have turned. Instead it has become apparent financial institutions are taking advantage of higher interest rates being paid by U.S Treasuries and continue to park money into these assets in order to guarantee a yield (return on investment). The purchasing of U.S Treasuries also happens to make the USD stronger, particularly when financial institutions from outside the U.S are parking money into the bonds.
1900.00 Important for Gold as a Trading Ratio
Day traders of gold should acknowledge that recent results mirror the strength of the USD against most major currencies. Speculators looking for upside in gold should also pay close attention to the level of nervous sentiment which exists in the markets. Yesterday’s release of the FOMC Meeting Minutes from the U.S Federal Reserve left an unclear outlook firmly in place for financial institutions. U.S inflation remains the buzzword for the Federal Reserve; if inflation can continue to incrementally decrease there is a firm chance the U.S central bank will be less aggressive. But the Fed doesn’t sound like it is ready to become dovish, noting that an expected recession is not materializing as of yet.
- However it isn’t only inflation that is worrying investors, talk about more downgrades to the U.S corporate banking sector are creating headwinds in equities. This has spurred on more buying of U.S Treasuries, which helps the USD and hurts gold.
- Technical traders may not want to hear anything about fundamental action in gold, but trading the past few weeks has certainly highlighted correlations to other assets and behavioral sentiment.
A Dangerous Lower Price Range Lurks from February to March of 2023 for Gold
While gold certainly may feel like it is oversold, bullish traders of the precious metal should be careful and acknowledge gold does not trade in a vacuum. The USD got strong from early February until the middle of March this year, and gold got much weaker and actually tested lower values around the 1805.00. Gold needs to be watched and if the USD remains strong in the near-term this could spark additional selling of the commodity and a test of key support levels
Gold Short Term Outlook:
Current Resistance: 1902.00
Current Support: 1893.00
High Target: 1916.00
Low Target: 1886.00
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