Top Story

Gold drops to critical support on extended slide

The price of gold has been heavily pressured for the past two weeks as commodity prices have generally slumped, the Federal Reserve has signaled more rate hikes, the US dollar has staged a significant relief rebound, and persistent risk appetite in the markets has decreased demand for safety assets like gold. This confluence of factors weighing on the precious metal has pushed price down to a key uptrend support line extending back to the December lows.

As a non-yielding, dollar-denominated, safe-haven instrument, gold has understandably fallen under the weight of current market dynamics, resulting in the sharp pullback since early June. This pullback brought price down from a failed approach/re-test of the key $1300 price area to its current breakdown below the $1250 previous support level. Despite this pullback, however, the general year-to-date uptrend is still intact – for the time being. This would likely change if a breakdown below the noted uptrend line occurs.

With sustained Fed hawkishness propping up further rate hike expectations, the dollar remains well-supported while gold remains pressured. Additionally, as complacent equity markets continue to fluctuate in progressively loftier record-high territory, gold demand could continue to suffer in the absence of any major risk concerns. Within this current market environment, the price of gold has the potential to break down further. In the event of such a breakdown below the noted trend line support, the next major downside target is around the $1215 price area, which represents May’s lows, followed by the key $1200 psychological support level.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.