Gold touches six-week low as robust dollar weighs
· Gold prices touched a six-week low on Wednesday, as the dollar strengthened with the coronavirus crisis rattling sentiment in Europe, while investors grew wary of further stimulus from the U.S. Federal Reserve.
· Spot gold fell 1% to $1,880.46 per ounce by 0641 GMT. Earlier in the session, bullion hit its lowest since Aug. 12 of $1,873.70. U.S. gold futures were down 1.5% at $1,879.10.
· The dollar index hit an eight-week peak, bolstered by upbeat U.S. home sales data and concerns about a second wave of coronavirus infections in Europe.
· A firmer dollar makes bullion more expensive for holders of other currencies.
· "We are seeing a risk-off environment taking hold, which means that the dollar continues strengthening and there is a lot of pressure on gold prices in the near-term," said Howie Lee, economist at OCBC Bank.
· Also weighing on sentiment were mixed signals from Chicago Federal Reserve President Charles Evans, who on Tuesday said the U.S. economy risks a longer, slower recovery and "recessionary dynamics" if Congress fails to pass an additional fiscal stimulus package. It is possible for the Fed to raise interest rates before inflation starts to average 2%, Evans added.
· Meanwhile, U.S. economic policymakers opened the door to further aid for small businesses hit by the coronavirus, but provided no quick path.
· "We are also seeing a slight pessimism about U.S. fiscal stimulus and that has probably curbed inflation expectations just a little bit," said IG Markets analyst Kyle Rodda.
· Gold, viewed as a hedge against inflation and currency debasement, surged about 24% this year, mainly supported by unprecedented stimulus measures by governments and central banks worldwide to revive their coronavirus-battered economies.
· The market is still expecting changes in policy settings that could lead to a stronger gold price overtime but that is a longer-term view, he added.
· Gold Price Analysis: XAU/USD hovers near $1,900, daily chart shows bearish pattern
The path of least resistance for gold appears to be on the downside, as the yellow metal's daily chart shows a bearish pattern, and the US dollar is breaking higher from its multi-week trading range.
The metal closed Tuesday with a 0.66% loss at $1,899 per ounce, confirming a downside break of a descending triangle represented by trendline connecting Aug. 18 and Sept. 1 highs and Aug. 26 and Sept. 8 lows.
The triangle breakdown indicates the four-week price consolidation has ended, and the pullback from the Aug. 7 record high of $2,075 has resumed.
The breakdown is backed by a below-50 or bearish reading on the 14-day relative strength index and descending 5- and 10-day simple moving averages.
The MACD histogram is again printing deeper bars below the zero line – a sign of the strengthening of the bearish momentum.
As such, the metal risks falling to the Aug. 12 low of $1,863. A close above the descending 10-day SMA, currently at $1,936, is needed to invalidate the bearish view.
· Citi on gold - bullish in the short-term and medium-term. Lift their 2021 forecast.
Gold outlook from Citi, analysts there "bullish gold tactically in the short-term and structurally over the medium-term."
Maintain our 0-3m point-price target at $2,200/oz and a 6-12m target at $2,400/oz.
We lift the 2021E base case gold price forecast by ~$300/oz, versus our early July update, to a record $2,275/oz.
· Silver fell 4.8% to $23.25 per ounce, having hit a nearly two-month low of $23.04 earlier in the session.
· Platinum fell 1% to $858.47 and palladium eased 0.1% to $2,217.75.
Reference: Reuters, Kitco, FXStreet, Forexlive
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