Gold falls on rate hike anticipation


Best analysis

Gold prices fell on Monday after a week of general downward drift as the markets braced for an expected rate hike by the US Federal Reserve.

Any interest rate rise and monetary tightening cycle in the US could potentially have a detrimental effect on gold due to a few reasons. The US dollar and gold generally have a substantial negative correlation due to the fact that gold is denominated in US dollars. If there is increased buying of the dollar as US interest rates rise, this negative correlation could translate into lower gold prices. Also, in higher interest rate environments, non-interest paying assets like gold tend to be less attractive, thereby weighing on demand and further pressuring the price of gold.

As it currently stands, the precious metal is not far above its new five-year low just below $1050 support that was recently established in early December. After that $1046 low was hit, a sharp pullback for the US dollar prompted a sudden surge in gold above the $1080 resistance mark. But that rally was short-lived, as prices quickly began reverting back down once again towards long-term lows.

Of course, gold prices have been in a general downtrend for at least the past four years, since the $1900-area highs in late 2011. The plunge since mid-October, however, has been especially brutal for many gold investors seeking a long-awaited bottom for the precious metal. It appears that that bottom may not yet have been hit.

With US interest rates widely expected to rise on Wednesday after the Fed concludes its two-day policy meeting, gold could be poised for further downside and new multi-year lows. With any breakdown below the noted $1050 support level, which would essentially confirm a continuation of the longstanding bearish trend, the next major downside targets are at the $1025 support level followed by the key $1000 psychological level.

Recommended Content


Recommended Content

Editors’ Picks

USD/JPY holds positive ground around 151.50 following Japanese CPI data

USD/JPY holds positive ground around 151.50 following Japanese CPI data

The USD/JPY pair holds positive ground for the second consecutive day near 151.45 on Friday during the early Asian trading hours. The cautious approach from the Bank of Japan to keep monetary conditions accommodative exerts some selling pressure on the Japanese Yen.

USD/JPY News

AUD/USD depreciates on risk aversion amid a stronger US Dollar

AUD/USD depreciates on risk aversion amid a stronger US Dollar

AUD/USD extends its losses for the second successive session on Friday. However, market activity is expected to be subdued due to light trading on Good Friday. Meanwhile, the US Dollar strengthens as recent data indicates annualized economic expansion in the United States, driven by consumer spending.

AUD/USD News

Gold price finishes Thursday’s session set to reach new all-time highs

Gold price finishes Thursday’s session set to reach new all-time highs

Gold price rallied during the North American session on Thursday and hit a new all-time high of $2,225 in the mid-North American session. Precious metal prices are trending higher even though US Treasury yields are advancing, underpinning the Greenback.

Gold News

Top 3 Price Prediction BTC, ETH, XRP: Retail watches from the sidelines with a bias for shorts

Top 3 Price Prediction BTC, ETH, XRP: Retail watches from the sidelines with a bias for shorts

Bitcoin is showing strength as markets head into the Easter holidays. As it rises, altcoins are following suit, with Ethereum and Ripple posting almost similar gains. Meanwhile, there remains an unfilled CME Gap, with a lot of liquidity also resting above and below BTC price.

Read more

Bears have been standing before a steamroller so far this year

Bears have been standing before a steamroller so far this year

Despite a pushback on rate cuts from Christopher Waller, and what was supposed to be cautious trading sentiment ahead of critical US inflation data released later on Friday, the S&P 500 rose on Thursday, marking its best first-quarter performance in five years.

Read more

Majors

Cryptocurrencies

Signatures