It’s been a while since I’ve touched on gold but much like most other asset classes this year, it has been a rather straightforward trend against the dollar. With the greenback benefiting from a hawkish Fed and yesterday still being the case, gold is finding itself under pressure yet again as we head towards the closing stages of the year.
The main driver for gold this year has been real rates and with that trending higher, it has proven to be a bane for gold with a fall from $2,000 levels to $1,620 levels at the moment.
After the Fed’s hawkish communique yesterday, it’s hard to see a let up in the trend and bond yields are already climbing once again. This will in turn keep the pressure on gold as it closes in on key support at the lows for the year:
A break below the September and October lows will set out the path towards $1,600 and if that gives way as well, it will mark another slippery slope for gold – at least from a technical perspective. Price is already trading under its 200-week moving average at around $1,690 at the moment so the case for an extended downside break is rather compelling – that is if the technical support levels above break.
That might make for one final push for the bears going into next year, all before we see more talk of a potential Fed pause – which should keep a lid on rates. Only then it is likely we will see a turnaround in gold sentiment as well.