Gold Prices
The gold price has tumbled to support at 1,863 after a further rally in the dollar and the precious metal faces the risk of further losses. Gold was trying to get back to retest the 2,000 level after seeing highs of 2,075 on August 7th but a rally in the dollar has seen commodities pulled lower.
The Federal Reserve started the ball rolling by holding rates steady and committing to an inflation target of 2%, but this strategy by the majority of central banks, with policymakers in Japan, England, Europe, and Australasia all following the same strategy. A few of these banks are now talking about negative interest rates and additional stimulus measures, but this is not an immediate development without a downturn in economic conditions and gold investors will be taking profits to await future meetings.
Data from Fidelity Asset management around July showed Exchange Traded Funds (ETFs) had risen to a record in assets under managament of over $4 trillion. Fund flows into commodities from this was $24.5 billion, up from $11bn in Q1 and a draw of -$0.5bn in Q4 2019. The Q2 figures would’ve been partly driven by stimulus checks in the U.S., which saw retail investors pile into markets. As Congress hits a stalemate in a second stimulus bill, the dynamics which drove gold higher are stalling.
Today’s calendar sees speeches from the Bank of England Governor and Fed Chair Jerome Powell’s testimony. These speeches are unlikely to provide anything we haven’t heard in the last week.
Gold stumbled after breaking the uptrend line and has since tumbled to the support level I had marked over a week ago at 1,863. Bullion needs to find support here or a further fall to the 1,800 level is possible. If gold can build a base at 1,863 then a further rally could build. The Investing Cube team is currently available to assist all levels of traders with a Forex Trading Course or one-to-one coaching.
