Gold plummets to lowest level since July at $1236
|- Gold lost more than $10 in the first two days of the week.
- Improved sentiment undermines the demand for the metal.
- Upbeat PPI strengthens the greenback.
After closing the previous day nearly $5 lower, the XAU/USD pair failed to make a meaningful recovery on Tuesday and dropped to its lowest level since late July at $1236 as it came under pressure in the NA session. As of writing, the pair was trading at $1240, losing nearly $2, or 0.15%, on the day.
Once again, the major equity indexes in the United States started the day on a high note and advanced to fresh record highs, hurting the demand for traditional safe-haven assets such as gold. At the moment, the Dow Jones Industrial Average is up 0.6% while the S&P 500 is adding 0.2%. The tech-heavy Nasdaq composite, on the other hand, is little changed on the day.
Meanwhile, following the upbeat PPI reading from the U.S., the greenback started to gain strength against its peers, pushing the US Dollar Index to its highest level in more than four weeks at 94.21. According to the data released by the U.S. Bureau of Labor Statistics, the Producer Price Index for final demand increased 0.4% on a monthly basis in November, lifting the annual rate to its highest reading since January of 2012 at 3.1%. The robust PPI reading seems to be allowing investors to price a hawkish tone in tomorrow's FOMC statement.
Commenting on tomorrow's critical Fed meeting, "several investment houses are forecasting four hikes next year, and have largely dismissed arguments that financial conditions are going to be tightened more aggressively by the shrinking of the Fed's balance sheet. We do not expect the dot plots for next year to change," BBH analysts wrote in a recent report.
Technical levels to watch
Although the CCI indicator on the daily chart is back below the -100 mark, the RSI indicator on the same chart eased below the 30 handle, showing technically oversold conditions for the pair. On the downside, supports for the pair could be seen at 1235 (Jul. 20 low), $1228 (Jul. 16 low) and $1215 (Jul. 14 low). On the upside, resistances are located at $1251 (Monday's high), $1264 (Dec. 7 high) and $1272 (200-DMA).
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