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Gold Has Lost Its lustre, Hits a New 1 Year Low

Commentaries & Views

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.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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