U.S. Treasury yields remain near multi-year highs; long-term charts for gold don’t look optimistic; retail investors are bullish on gold, which means prices could fall.
With bears still looking absolutely dominant, gold looks set for a fifth straight monthly decline and another re-test of the $1,700 round-figure mark for the first time in nearly six weeks. Gold’s latest losses stemmed from a hawkish stance delivered by Fed Chairman Jerome Powell and other members of the Board of Governors last week, who reaffirmed the central bank’s determination to keep raising interest rates to fight inflation. Financial markets are now betting on a 70 percent chance the Fed will raise rates by 75 basis points at its September meeting. It is expected that the Fed will further raise interest rates before mid-2023, raising interest rates to a level of 3.75%-4.00%. The Fed’s current interest rate is 2.25%-2.50%.
Powell supports a sharp interest rate hike to fight inflation, and gold plummets in the short term! The Fed raised interest rates and the price of gold fell sharply. How to understand the relationship between gold trends and interest rates? “Thursday Talks Gold”, click to reserve the front-row seat of the live broadcast now to listen to DailyFX senior analyst Jack Liu deciphering the gold transaction for you!
Continued rises in short-term interest rates over the coming year have pushed U.S. short-end Treasury yields to levels not seen since late 2007. A repricing of the Federal Reserve’s outlook for interest rates in the coming months has weighed heavily on gold and is expected to continue for the foreseeable future.
The monthly chart of gold trends shows that gold is approaching the former support range of 1707-1668, and it is expected that gold prices will revisit this range in the next few weeks. Gold is currently trading below the short-term moving average (red), while the CCI indicator is oversold but has yet to hit extreme levels (multi-month lows). However, the CCI indicator does suggest that the market will need some time to resolve the issue before the price of gold falls further.
Gold Trend Monthly Chart—August 31, 2022
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