Gold Has Lost Its lustre, Hits a New 1 Year Low
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Gold has lost its lustre. The precious metal hit a fresh one-year low right after the London session opened on Thursday. A strong US dollar has led the gold price downwards.
The latest round of weakness in Gold price was motivated by the hawkish rhetoric from the Fed Chair Jay Powell. Powell argued that the US economy remains strong enough to support further gradual increases in interest rates. Demand for both the dollar and interest-bearing assets are not a good backdrop for gold.
The lack of demand for gold during tensions over international trade has been telling. Gold tends to experience safe-haven demand only in extreme situations. Apparently Trump has not been extreme enough for gold. It is hard to see the gold price gaining traction until there is a full-blown vicious cycle of retaliation in the trade war. This might need to be both between the US and China and its other major trading partners.
According to gold’s seasonal pattern, July tends to see lower trading activity. Investors tend to shift their focus away from the precious metal during the summer when physical demand is lower. It is often during the late summer months when investors start buying again. Seasonal tendencies suggest the price still has another month to find levels with which to build a base.
The Gold technical pattern remains distinctly bearish. The line in the sand is the big round number $1200 per oz. As long as bulls hold the line steady above $1200, we may see a mean reversion play out towards the 200-day moving average.