Gold has fallen below $1,900 an ounce in the face of the strength of the US dollar and a macroeconomic environment that makes it difficult to see the precious metals making any headway.
Gold has been on a steady decline throughout August with the key threshold of $1,900 not providing much resistance with the price close to its lowest level in about five months.
High inflation remains a concern for central banks around the world with yesterday’s publication of the minutes from the Federal Reserve Open Market Committee’s July meeting confirming that the US central bank could well implement further interest rate hikes.
This has a doubly bearish impact on gold as the prospect of more hikes has strengthened the US dollar and therefore reduced the value of any goods priced in the greenback, including gold. Rising interest rates also reduce physical gold’s appeal as its lack of yield make other interest-bearing assets, such as bonds, more attractive instead, with US Treasuries making considerable gains on the expectation of higher-for-longer interest rates.
The one factor preventing gold from falling faster and further than it has so far is the fragile confidence in the health of the global economy amid lingering fears about a looming recession. This has ensured that traders and investors haven’t yet completely shed their safe-haven blanket in gold and remain unwilling to adopt a fully risk-on approach. As such, gold is likely to continue its steady slide downwards with $1,850 the next level for gold investors to hope there is sufficient resistance to consolidate around.
Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News.
As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.
