Gold prices have seen a slight rebound, however, analysts remain a bit pessimistic about the outlook for the metal. At the beginning of the week, gold prices fell to a four-month low of $ 1,677.9 per ounce, and the price is currently trading around the $ 1,748 zone.
The market optimistically took a better-than-expected US employment report, and investors soon moved to buy dollars in response.
The gold price and the dollar have an inverse correlation. As the dollar strengthens against other currencies, the price of gold will fall. This will result in reduced demand.
Meanwhile, gold has been recovering some of its losses, however, it is difficult to remain optimistic in the long term. This, due to the possibility of change in the monetary policy of the United States.
Markets expect the Federal Reserve to reduce monetary easing. In addition, it is expected to reduce stimulus as the economy recovers from the pandemic.
Trading Opportunity: When real yields go up, gold prices go down, and vice versa. In this scenario, the opportunity cost of holding gold, a non-yielding asset, is higher as investors are foregoing interest that would be otherwise earned in yielding assets.
How Is the Price of Gold Fixed?
Gold's price was fixed in London on September 12, 1919, at the NM Rothschild offices. From then until now things have changed little.
Currently, the five London Gold Fixing Association members fix the price twice a day via telephone. According to London time, two calls are made at 10:30 a.m. and another at 5 p.m.
Some experts consider this second pricing to be more important since this is when the market in New York is working.
The current members of this association are:
- ScotiaMocatta, the successor of one of the founders
- Barclays Capital, replacement of Rothschild
- Deutsche Bank, after acquiring Sharps Pixley in 1993
- HSBC, owner of Samuel Montagu
- Societe Generale, which replaced Johnson Matthey
Trading Opportunity: Whenever you hear price predictions or news about them, take note because this will affect the gold price outlook.
Gold Trading Opportunities
Gold's monthly chart shows that the current price is around the 23.8% Fibonacci retracement.
The next bearish support level is located at $1723. If the bears win the battle the next important level is $1620. The $1675 zone is key for further gold. price movements.
If gold holds above $1790, it could continue its recovery. The next resistances are at $1858 and $1952.
The change in gold prices over time has been:
However, "A stronger US dollar combined with a gradual increase in US 10 years real yields suggest that gold prices should trend lower," some experts have said.
We must closely follow the evolution of U.S. bond yields to know the future of the gold price. Likewise, monetary policy in the U.S. is key for the coming months.