Gold prices continued moving upwards on Wednesday, climbing above $1,670 per ounce, as the US dollar and yields plummeted. If gold prices decline, support may be found near $1,614 per ounce and further down at the 2020 low near $1,441 per ounce. Resistance may be around 1,683 per ounce and higher at $1,729 per ounce.
The dollar continued to decline on Wednesday, with the dollar index dropping below the 110 level. US Treasury yields also declined, failing to provide support for the dollar, with the US 10-year bond yield dropping close to 4.0%.
The dollar has been trading in overbought territory and has been slipping ahead of the Fed meeting next week. No FOMC members’ comments are expected this week, as a black-out period started on Saturday, preventing further comments until the central bank’s next policy meeting in November. Without the fortifying effect of hawkish Fed speeches, the dollar becomes more vulnerable to the release of US economic activity and health indicators.
Indicators of economic activity and health released on Wednesday for the US were overall disappointing for the state of the economy, decreasing the chances of a steep Fed rate hike and putting pressure on the dollar.
Gold prices are under pressure by the shift of most major Central Banks towards a tighter monetary policy to combat rising inflation rates. Assets yielding interest become a more appealing investment compared to gold as interest rates rise. Rampant US inflation has raised expectations of another steep rate hike at the Fed’s next policy meeting in November, putting pressure on gold prices. The US Central Bank has increased interest rates by a total of 300 basis points this year, bringing its benchmark interest rate to 3.25%. Another 75-bps rate hike is expected at the Fed’s next monetary policy meeting in November and has already been largely priced in by markets.
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