Gold touches 2.5-month low suppressed by a strong US dollar
Gold broke through the long-term dynamic support provided by the symmetrical triangle it had been trading in since the very beginning of 2014; the USD outperformance curbed demand for the precious metal.
Gold was knocked down to a 2.5-month low on Tuesday. As of 9:20 pm GMT, it was trading at $1265.70, spilling out of the symmetrical triangle it had been trading in for the last 8 months. The break through the dynamic support connecting the lows since 31 December 2013 signals further losses for the precious metal. Fundamentally speaking, bullion was hurt from the strong dollar which lowered its demand.
While gold benefited from last week’s heightening geopolitical tension in Ukraine, the USD rally pressured prices lower. The dollar index soared to a one-year high of 82.92.
The current expectations towards the Fed are for earlier rate hike compared to other central banks, given recent economic data improvement. In a report due later this week, data is expected to show the US manufacturing sector at its strongest level since April 2011. On Friday, all eyes will be on the nonfarm payrolls, used by investors as the crucial determinant of changes to the Fed’s monetary policy.
Before that, the focus will be on the Thursday’s policy decision of the ECB. New stimulus measures are expected on part of the bank to prop recovery and to fight low inflation. It is doubtful, however, that any concrete steps will be taken at the September policy setting meeting. Investors are anxious that important decisions will be posponed, and the European Cental Bank will do too little too late.
