FXTM information and reviews
IronFX information and reviews
Libertex information and reviews
FXCC information and reviews
Markets.com information and reviews
FxPro information and reviews
42 567.79

What's been moving Gold prices?

13 January 2021

Gold prices are enjoying some relief, after falling by more than 7% from the two-month high of around $1960 that it posted last week. On a week-to-date basis, spot Gold is eking out a 0.6 percent advance at the time of writing. The slight recovery has pared Gold’s year-to-date losses to less than 2%.

From a technical perspective, Bullion’s 200-day simple moving average (SMA) has been called into action once more, playing its role as a key support level. Gold bulls can take comfort from the fact that, since the end of 2018, prices have been trading consistently above its 200-SMA, and the two dips below that line over the past 12 months have been short-lived.

In other words, Gold’s uptrend that extends back to 2018 remains intact, with the 200-SMA having been a reliable support level.

Also note that the pullback which began last week could be deemed a healthy move from a technical perspective, considering that Gold’s 14-day relative strength index had reached overbought status by hitting the 70 mark. With much of the froth now seemingly cleared, the precious metal may now make a more rational move higher. Still, spot prices may have to clear that November high of $1965.46 to embolden Gold bulls further.

How is Gold affected by the Dollar and Treasury Yields?

Note that Gold has an inverse relationship with the Dollar, given that the precious metal is priced in USD. In simpler terms, when the Dollar goes down, Gold prices tend to go up, and vice versa. Also note that Gold is a zero-yielding asset. When the yields on US Treasuries climb, they make such investments more attractive relative to the zero-yielding Bullion. This could result in a rotation away from Gold to Treasuries, with the latter widely deemed to be a risk-free investment.

With such a context in mind, the recent pullback in Gold prices was the result of a Dollar rebound amid surging Treasury yields.

The 10-year Treasury yields strained towards the psychologically-important 1.20 percent level, after surging 30 percent between the past two Tuesdays (5 – 12 January), reaching its highest levels since March in the process. Since then, the 10-year yields have retreated by about 6.4 percent, while the Dollar index has moderated back below the 90 mark, offering some respite for Gold.

What is the outlook for Gold?

There appears to be enough reasons to remain bullish on Gold, and they revolve around US inflation. Markets are expecting US inflation to overshoot, with the Federal Reserve stating it will tolerate as such. Considering Gold’s traditional role as a hedge against faster inflation, that should ensure Gold remains well-bid in the lead up to such economic conditions.

Real yields for US Treasuries (which take into account expectations for inflation) are in negative territory, which suggests that the yields that investors are expecting to get from US Treasuries aren’t going to overcome the forecasted inflation rate. This should ensure that Gold can maintain its allure as an inflation-beater.

There is also a consensus that we could see more Dollar weakness over the coming months, despite rising US yields recently challenging such a narrative. A weaker Dollar should make it easier for Gold prices to explore its upside.

Things to look out for this week

The December US inflation data is due out later Wednesday. A higher-than-expected print may fuel tailwinds in Gold prices.

Watch Fed chair Jerome Powell’s speech on Thursday. Recently, there has been some contrast among Fed officials’ views on when to pare back the central bank’s asset purchasing programme (a way to support the economy and financial conditions). The mere suggestion that the Fed could ease up on those asset purchases sometime this year has spurred Treasury yields higher. Then on Tuesday, St. Louis Fed President James Bullard and Boston Fed President Eric Rosengren poured cold water on the idea, prompting Treasury yields to pare down recent gains. Watch for more potential cues out of Powell.

Also on Thursday, President-elect Joe Biden is set to unveil his plans for more US fiscal stimulus which he claims would be in the “trillions”. Such swathes of incoming financial aid for the US economy could spur inflationary pressures higher. Should Gold bulls be delighted by what they hear, don’t be surprised to see Gold prices charging upwards.



Gold's sudden glow in a falling market
Gold's sudden glow in a falling market

Gold's ability to resist the general downtrend speaks to investor confidence that global central bank policies will remain soft enough to avoid triggering a global downward asset sell-off spiral...

21 Sep 2021

Forex and Cryptocurrency Forecast for September 20-24, 2021
Forex and Cryptocurrency Forecast for September 20-24, 2021

The dollar continues to strengthen, and the EUR/USD pair moves south. Starting on Monday September 13 at 1.1810, it ends the five-day run at 1.1730. The movement...

20 Sep 2021

Gold and Silver looking into the abyss
Gold and Silver looking into the abyss

Strong US data revived bets on an imminent QE rollback from the Fed, supporting the dollar and causing bond yields to rise. The news triggered a more than 2% plunge in gold prices...

17 Sep 2021

Stocks pick up some bid after textbook SP 500 bounce
Stocks pick up some bid after textbook SP 500 bounce

European stock markets were modestly higher on Thursday after a rebound in the US and another dip for Asian equities overnight. Hong Kong down 1.7%...

16 Sep 2021

Stock Futures Trade Lower, Investors Worry About Fed Tapering
Stock Futures Trade Lower, Investors Worry About Fed Tapering

US and European futures are trading lower today, following a retracement in US indices. The Dow Jones Industrial Average fell nearly 290 points, wiping out gains...

15 Sep 2021

Futures in the United States and Europe are up today
Futures in the United States and Europe are up today

Futures in the United States and Europe are up today after the Dow managed to gain nearly 260 points and break its five-day losing streak. Although investors...

14 Sep 2021

Editors' Picks

OctaFX information and reviews
HotForex information and reviews
XM information and reviews
FXCM information and reviews
Vantage FX information and reviews
Vantage FX
Moneta Markets information and reviews
Moneta Markets

© 2006-2021 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.