It’s been tough for gold as it has been feeling confused throughout this year, losing its safe haven status. It has been on a bearish trend, but seems to have recovered some of the losses in the last two weeks. A fall in the US Treasury yields and hints that the Fed might not tighten as much as feared have lent a bid. It’s up $21 to $1755 after a similar gain yesterday after the FOMC.
So far it’s tough to call this anything other than a dead-cat bounce after the plunge from around $2,070 in March. It would need to get above $1,786 to get any momentum. That said, it bottomed where it needed to, right at the support below $1,700, holding the Q1 2021 lows. So there’s now a well-defined range between $2,050 and $1,680.
Gold Weekly Chart – The Support Zone Below $1,700 Held
The 200 weekly SMA added strength to the support for XAU/USD
What I’ve noticed so far in earnings in Q2 is tremendous inflationary pressures on miners because energy is such a large input. That strengthens my conviction that we will have a material spike in copper in the years ahead and other base metals but it could also apply to Gold over time. Given the strength in the US dollar this year, the decline in gold isn’t as bad as looks. If it can finish the year above $1,800 that would mean a positive year (in some cases strongly) against nearly every currency.
Besides everything else, today we saw the US Q2 GDP report show another contraction in the US economy, after doing the same in Q1, so the US is officially in recession. This is bad for risk assets, but the fact that the FED will soften the strong rate hike policy is positive. Everything else seems confused, so traders are betting on Gold, which is benefiting from all this.
GOLD
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