Why Is Gold Down $90?

Gold should end September at almost $90 lower. Analysts predict a washout if the price falls below $1,700 per ounce.

According to economists, the two-punch combo of rising US Treasury rates and a stronger US dollar is pulling gold lower amid inflationary fears and risk-off attitude in the market.

December Comex gold futures were trading at $1,725, down 0.72 percent on the day. Meanwhile, the US dollar index was at 94.36, up 0.64 percent. The US 10-year Treasury yield was at 1.541 percent at the time of writing. The products and the dollar are the two most important factors. The relationship between increased profits and metals is inverse. “When yields are rising, metals are falling, and the dollar is growing, it’s an excellent time to buy,” Daniel Pavilions, senior commodities dealer at RJO Futures, told Kitco News.

Gold is “barely hanging in there,” according to Pavilions. Moreover, he added that if the precious metal goes below $1,673, the market might witness a washout to $1,550 per ounce.

Considering the recent rise in the US dollar index, MKS PAMP GROUP head of metals strategy Nicky Shiels believes gold is holding up nicely.

Inflation Expectations

Gold is currently trading at $1,730 per ounce. It is the same as when Bitcoin hit $60K and all the fuss was about cryptos, not precious metals. Beyond that, gold has technically erased all ‘COVID premium’ (a stretch, in our opinion), at $1,560. 

Fed Chair Jerome Powell signaled that tapering could begin in November and stop by the middle of next year. Hence all near-term risk-off feelings have benefited the US dollar, not gold, as Shiels pointed out.

Any near-term worry has been directed solely into the safety of the US dollar. Gold is on “thin ice” as the 10-year Treasury yield approaches 1.60 percent, according to OANDA senior market analyst Edward Moya.

The $1,700 level appears imminent for bullion. Many traders are looking to the March lows as necessary support ahead of $1,670. The resetting of inflation expectations has had little effect on gold prices, and it has been the key driver of Treasury yields, “Moya said. If gold shows signs of stabilizing, longer-term investors will return and gamble on a worldwide economic rebound in 2022, resulting in a weaker dollar.