Gold is Headed for 6 Month Low

In the middle of trading this week, gold futures fell below the support level of $1,900 per ounce, driven by the rise of the US dollar and the rise in Treasury bond yields. The yellow metal has suffered over the past month due to the tightening of monetary policy. Prices could fall further if the US Federal Reserve pulls the trigger to raise US interest rates again by the end of the year. According to the trades, the price of gold XAU/USD has fallen to the lowest support level of $1873 per ounce since last March and stabilizes around the level of $1878 per ounce at the time of writing the analysis.

Gold prices are down about 5% this week and down nearly 4% this month. From the beginning of the year 2023 until now, the price of gold rose by only 3.4% after rising by 10%. The prices of silver, which is the sister commodity of gold, fell below 23 dollars per ounce again. The price of the white metal is already down 3% this week and down over 7% this month. Since the beginning of the year until now, silver prices have fallen by about 6%.

The US Dollar Index (DXY), a measure of the US currency against a basket of other major currencies, advanced to 106.75, and overall the index rose 1.3% this week and is up 3% year-to-date. The stronger dollar makes goods denominated in dollars because it makes their purchase more expensive for foreign investors.

U.S. Treasury yields rose mostly across the board, with the 10-year yield up five basis points to 4.607%, a 10-year high. The yield on two-year bonds rose by 5.4 basis points to reach 5.131%, while the yield on 30-year bonds rose by 2.7 basis points to reach 4.723%.

Gold is usually sensitive to interest rate movements because it can affect the opportunity cost of holding the bullion that doesn’t yield a return.

For gold investors, all eyes will be on the Fed’s favorite measure of US inflation: the Personal Consumption Expenditure Price Index. This measure will be published on Friday and is expected to jump again. Gains may stimulate expectations for a future tightening of the American Federal Reserve’s policy, thus supporting the US dollar and causing new losses for gold.

As for other metal commodity prices, copper futures fell to $3.64 per pound. Platinum futures fell to $885.10 an ounce. And palladium futures settled at $1226.00 per ounce.

• According to the performance on the daily chart below, the general trend of the price of gold XAU/USD has turned downward since breaking through the $1900 support.
• The trend has reached an important support price of $1875 per ounce.
• The next most important support will be $1860 per ounce if the gains of the US dollar continue as a reaction to the positive results of the economic data today.
• I still prefer to buy gold from every level of decline with no risk.

If the results of the American economic data are weak, the price of gold may find the opportunity to rebound to the resistance of $1900 per ounce again.

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