Concerns about the aggressive monetary policies of major central banks are suppressing the demand for bullion. Gold prices fell on Wednesday as that pressure outweighed the relief from the dollar’s recent pullback.
“Gold seems to be a strange person in a falling dollar environment”
Spot gold was trading at $1,707.95, down 0.2% at press time. U.S. gold futures fell 0.3% to $1,705.50 a barrel. The dollar remained stable after a three-session streak, although it remained relatively high. This made dollar-priced bullion cheaper for buyers holding other currencies.
Stephen Innes, managing partner of SPI Asset Management, says that gold appears to be a strange person by not participating in a wider relief rally in a lower dollar environment. Innes adds that front-loading rate hikes by central banks clearly undermine bullion’s appeal.
Stephen Innes: Gold failed to make the expected leap
cryptocoin.com As you can follow, British inflation reached its highest level in 40 years in June. This increased the chances of the Bank of England’s rare half-point rate hike next month. European Central Bank (ECB) policymakers are considering raising interest rates by 50 basis points at its meeting on Thursday to curb record inflation. This increase is above the expected increase of 25 basis points.
Stephen Innes notes that the dollar is likely to react to a more aggressive rate hike by the ECB. Therefore, the analyst says, gold has not made the bounce that would typically be expected on a softer dollar.
According to Wang Tao, critical levels for yellow metal
Gold is accepted as an inflation hedge. However, higher interest rates increase the opportunity cost of holding noninterest-bearing bullion. Meanwhile, benchmark US 10-year Treasury rates eased after two sessions of gains.
Spot gold is likely to retest the resistance at $1,721, according to Reuters technical analyst Wang Tao. A break above this is likely to lead to an increase in the $1,728-1,739 range.
“Even rising concerns about the recession did not benefit gold”
Commerzbank Research’s latest Commodity Update was released on Tuesday. Analysts say, “Gold has failed to maintain its reputation as an inflation hedge and safe haven in times of late crisis.” Inflation rates in the US and Europe are higher than they have been in decades. Analysts note that gold has been under selling pressure for weeks, although it has been climbing higher lately. Analysts make the following assessments:
It saw sharp declines in the stock markets. Also, the yield curve has inverted. However, even growing concerns about the recession did not benefit gold. On the contrary, its price even dropped below $1,700 at the end of last week. This was the first time in 11 months. Moreover, gold rallied its weekly losses for five consecutive weeks, which has not been seen for nearly four years.
Commerzbank: Frustrated investors are throwing in the towel
In addition, analysts note that during these five weeks, gold has lost almost 9% of its value. More and more disappointed investors are throwing in the towel, according to analysts. Also, he is setting aside his gold investments. These put additional pressure on the gold price. Analysts are trying to explain this situation as follows:
This can be seen especially in gold ETFs. In about the past four weeks, 95 tons of gold have been withdrawn from ETFs tracked by Bloomberg. That’s nearly double the net outflows seen in the entire second quarter. About two-thirds of the exits were recorded by the SPDR Gold Trust, the world’s largest gold ETF used primarily as an investment vehicle by institutional investors.
