Gold prices reached a 13-week low of $1,799 per ounce last week, pushed down by the strong dollar and US yields. Gold prices were catapulted to the $1,849 per ounce level on Thursday, as risk aversion sentiment grew, while the dollar weakened. If the price of gold decreases, further support may be found at $1,782 per ounce, while resistance may be found at around 1,920 per ounce and higher up at $2,000 per ounce.
The price of gold is balanced between conflicting market forces, supported by risk aversion sentiment but pushed down by high dollar and real yields.
The risk-aversion sentiment was renewed on Thursday, driving stock markets and high-risk assets down. Retail stocks from Target and Walmart declined heavily this week, while technology stocks, such as Amazon, Tesla, and Apple were also down. Gold prices benefited from the market sell-off, as traders moved towards safe-haven assets. Even though stock markets rallied by the end of the day on Thursday, gold prices remained high.
Bond yields also declined across the US Treasury curve, with the only exception being the 1-year note, while the US 10-year treasury note yielded approximately 2.8% on Thursday. Real yields compete directly with gold, which is a non-interest-bearing asset, and their rise puts pressure on the price of gold. The USD, which has been moving into overbought territory, softened this week, weakened by the lack of support from Treasury yields. The decline of the USD and US bond yields makes competing assets, such as gold, more appealing as an investment.
High inflation rates are also known to support the price of gold, which is often used as an inflation hedge, and with global inflationary pressures increasing gold price is once again on the rise.
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