Gold starts the week slowly
Published on 01.10.2018 18:15

The gold price has come under renewed pressure in today’s trading session as more investors head for the exit gates in favor of the US dollar in order to receive higher gains on their investments.

The US dollar has really gained traction since last week on the back of higher rates as well as some savvy moves from the Trump Administration.

"Gold prices remain dependent on the dollar prices at this juncture. The U.S. economy has been rosy and better than expected. Efforts by the Trump administration to reduce the trade deficit from an economic point of view has been friendly for the greenback as well," said Barnabas Gan, an analyst from OCBC

For the best part of a decade, the greenback hasn’t exactly been one of the highest yielding currencies and investors only bought it for its relative safety but over the last 12 months as the US Federal Reserve has been lifting interest rates, the dollar has also become attractive as an interest bearing investment which is something that gold is not.

More interest rate hikes also look to be on the way and the bullish tone of the Fed has only added fuel to the fire on gold’s demise which has caused not only a higher dollar, but also a booming stockmarket and if they are to believed, a rising US economy

The big question now is will gold retain its usual status as a safe haven as it has been widely known for of are those days coming to an end.

 Some say in the short term at least, gold is likely to see further losses and may be headed down to a former resistance level and if that doesn’t hold it may be in for real trouble.

"Gold has been a seller's market for some time, but with the $1,190 level yielding, we're now firmly in the gold bear zone and as such with the dollar likely to strengthen on the back of widening interest rates differentials, selling activity could intensify with speculators likely to target the August low when the yellow metal hit $1,160 before rebounding," said Stephen Innes, APAC trading head at OANDA in Singapore.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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