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(Kitco News) – Although the session is low, the gold market is struggling to find some buying momentum, as disappointing Federal Reserve news has pushed the US dollar higher.
The gold market has not found traction since last Wednesday, after the Federal Reserve gave no new indications on interest rate expectations and said it saw no benefit to bond yields.
December gold futures traded last at $ 1,938.80 an ounce, 1.6% down on the day. Meanwhile, the US dollar tested initial resistance around 93 points.
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Interestingly, lower interest rates did not have much impact on gold prices. The yield on 10-year bonds is currently trading at 64 basis points, down more than 4% on the day. Traditionally, yields of lower bonds are positive for gold because it reduces the holding cost of the precious metal as a non-yielding asset.
According to some commodity and market analysts, markets were disappointed that the US Federal Reserve did not provide new information on further incentives.
“The gold market wants to see clear control over yield curves, ”said Adam Button, chief currency strategist at Forexlive.com. “ [The gold investors] wants to hear nothing but printing press. ”
George Gero, managing director of RBC Wealth Management, said Wednesday’s minutes of the monetary policy meeting in July looked at the gold market and created crippling sales pressure that was already making some profit.
However, Gero admitted that the minutes are not a game-changer for the gold price, as he expects investors to jump into a purchase at lower prices.
The question now is exactly how low gold prices can go. Ilya Spivak, chief strategist at DailyFX.com, warned that breaking gold below $ 2,000 could set an ounce for a $ 200 correction.
“A break below this barrier confirmed on a daily closing basis seems likely to expose a support cluster near the $ 1,800 / oz mark. Alternatively, a pressure above the swing high at $ 2,015.65 is likely to set the record high at $ 2,076.58, ”he said in a note Thursday.
Although the gold market is again seeing significant sales pressure, many analysts do not see the sentiment declining in the long run.
Button said he expects investors to continue buying gold on dips.
“I do not think this is a game-changer for gold,” he said. “Every now and then we see the Federal Reserve what it takes to support the economy.”
The gold market is not even getting much momentum from weaker-than-expected U.S. economic data. Data from the U.S. Department of Labor showed that initially weekly claims jumped weeks above one million, disappointing market expectations.
At the same time, the Philadelphia Federal Reserve said its outlook for manufacturing business fell to a reading of 17.2 in August, also missing expectations.
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 the accuracy of the information provided; however, neither does Kitco Metals Inc. nor can the author 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 does not accept any liability for loss and / or damage resulting from the use of this publication.
