Gold remains pressured despite weak dollar
James Chen, CMT April 4, 2016 9:10 PM
Gold continued to be weighed down along with other major commodities on Monday despite persisting weakness in the US dollar and lowered expectations for further Fed rate hikes.
Since a 13-month high around $1280 was reached just over three weeks ago in mid-March, the price of gold has fallen in a series of lower highs and lower lows. This steady retreat has occurred even as the US dollar has also steadily lost ground during the same period due to progressively diminishing anticipation of additional US monetary policy tightening in the near-term. Since gold is denominated in dollars and is a non-interest-bearing asset, conventional wisdom would suggest the opposite – low interest rates and a falling dollar should lead to a boost for gold.
However, another characteristic of gold – that it is considered a safe haven asset in times of market turmoil and volatility – has helped to place some pressure on gold prices for the past several weeks. Specifically, US stock markets have been in a prolonged rally, sharply reversing the heavy losses incurred during the early part of the year. This has helped to decrease the attractiveness of gold as a safe haven.
Technically, during the course of gold’s decline within the past three weeks, price has broken down below several factors that have helped define its recent steep uptrend. These include both an uptrend line extending back to January lows as well as the key 50-day moving average.
If gold has indeed formed an intermediate top, any continued strength in equity markets could lead to a further loss in value for the precious metal. In this event, the next major target below the $1200 psychological level is at key $1190 support. With any continued downside momentum, further bearish support targets reside at $1170, followed by $1140, where the 200-day moving average is currently situated.
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 Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.