After reaching a 20-year high on May 13th, the U.S. dollar index has dropped more than 2%. Gold prices, however, are up roughly 4% after rising off support below $1,800 an ounce.
The gold market has recaptured another major psychological threshold, with prices pushing back over $1.850 an ounce. The precious metal is gaining new positive momentum, according to experts, as the U.S. dollar continues to face selling pressure.
Some analysts see room for the U.S. dollar and gold to rally together, especially as equity markets remain volatile.
Many analysts see further weakness ahead as corporate earnings face inflationary headwinds and rising recession fears.
“Equity market conditions can still worsen,” said Phillip Streible, Chief Market Strategist at Blue Line Futures. “There are signs that economic conditions in the U.S. are starting to deteriorate. That will drive safe-haven demand for gold and the dollar.”
Gold prices are not moving up even as inflation is raging globally. Traditionally, gold is considered to be the best hedge against inflation. However, gold prices seem to be moving in a tight range in the current scenario, even though inflation is making waves globally.
In the U.S., inflation is close to 8.5%, almost at a 40-year high. In Sweden, inflation is close to 6.5%.
Interest rates are keeping the gold price in check. In the U.S., interest rates have started to increase, and there is a high probability that the FED will continue to rise interest rates by 0.25-0.75 basis points in the next meetings. In a rising interest rate scenario, gold is not a preferred investment.
Despite a number of significant sales, global central bank gold demand remained brisk as net holdings increased by 83.8 tons in the first quarter of 2022.
*Red lines are downtrend. The heavy red line is the long-term trendline.
*Green lines are uptrend. The heavy green line is a long-term trendline.
*Blue lines are short term support & resistance lines
(Picture 1. Trendlines & Support/Resistance)
You can check more interactive graphs from our Tradingview account.
(Picture 2. – Garterly pattern, moving averages and RSI)
(Picture 3. RSI)
In conclusion, there are no sure price indications nor a fundamental indication of super-strong price movements. The gold price can spike up when inflation affects the broader economy deeper, and the equity market falls even further.
Disclaimer: This article is for informational purposes only and is not intended as an investment analysis or recommendation to sell or buy commodities. Tavex is not responsible for any decisions made based on this information. Investing is associated with opportunities and risks, and the market value of commodities can both increase and decrease. Past or future yields on the commodities and financial ratios shown above do not represent a promise or an indication of future earnings