Trading | 2 months ago
Last week the dollar recorded the strongest gain in over one year due to the federal reserve's rate hike projection. Federal reserve's officials indicated that interest rates may rise little earlier than expected. As this announcement went viral, gold started trending downward immediately and on Friday the decline became sharper.
This projection of federal reserve's officials strengthened the US dollar. As a result, the US Dollar Index which is used to measure the value of the dollar against a basket of six world currencies - Euro, Swiss Franc, Japanese Yen, Canadian dollar, British pound, and Swedish Krona jumped 0.44% on Friday. Since the value of US dollar is inversely related to the price of gold, so when the value of the US dollar increases relative to other currencies worldwide, the price of gold tends to fall sharply. Last week till Friday, the spot price of gold fell by 6.05% to settle at $1764 .23 against the US dollar.
As there was so much chaos in the market, bears have taken over the gold market completely in the last week. Gold price closed with the strong bearish momentum than expected. However, today gold is trading at $1776 and is up by 0.70 % against the US dollar after all the panic settled down. On the daily chart of gold, a corrective pull back was seen during the Asian trading session. Analysts expect that the fall in gold is temporary and as soon as the U.S. Treasury yields Show any sign of weakness, gold will again rise back.
The long-term technical outlook for gold is bullish after easing of reflation fears. The technical indicators suggest that gold will hold up its support level at $1789. One must look for buying opportunities in gold at this support level. At this support level the gold price will benefit from the sell-off in the US Treasury yields and may reach the $1815 target level within a couple of weeks.
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