Is Gold's Potential Downturn Not Over Yet?
Gold prices remain under significant pressure after recording a sharp decline throughout the last quarter. The precious metal has weakened by around 15%, its deepest quarterly decline since 2013. This situation has led the market to question whether the selling pressure on gold is over or whether it will continue.
The main pressure comes from growing concerns that the Federal Reserve still has the potential to raise interest rates. Uncontrolled inflation has led several Fed officials to open the door to tighter policy. If interest rates rise again, gold could face further pressure because it does not provide the same yield as bonds.
Gold prices are also increasingly weighed down by the strong US dollar and persistently high bond yields. In such a situation, investors tend to prefer dollar-based assets or interest-bearing instruments. As a result, gold's appeal as a hedge has weakened.
Technically, selling pressure is becoming increasingly apparent after gold prices fell back below the psychological level of US$4,000 per troy ounce. In Tuesday morning trading, gold even touched a low of around US$3,943. The breach of the US$4,000 level is a negative signal, as this area was previously considered a key stronghold for buyers.
Negative sentiment was also evident in the decline in gold-backed exchange-traded funds (ETFs), which fell to their lowest level since September. The decline in ETF holdings indicates that some investors are reducing their exposure to gold. If the outflow continues, pressure on gold prices could intensify.
Market focus is now on this week's US non-farm payrolls data. If the employment data is solid, the Fed will have a stronger reason to maintain or even raise interest rates. Under such conditions, gold price projections from several analysts could be lowered again, triggering a further selling wave in the gold market. (asd)
Source: Newsmaker.id
