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Gold price has weakened from $1916 to $1761 since the beginning of June 2021, and the current price stands around $1780. Gold remains under pressure amid concerns that the U.S. central bank might raise interest rates sooner than previously expected.
Fundamental analysis: The appreciation of the U.S. dollar negatively influences the price of Gold
Gold price extended its correction from its highs registered in the first week of June after the U.S. central bank turned to a more hawkish stance, forecasting two interest-rate hikes before the end of 2023. U.S. inflation rose in May at its fastest pace in almost 13 years, and investors will continue to pay attention to the bank’s commentary looking for any clues.
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“Another regional Fed president revealed yesterday that he is in favour of a first-rate hike as early as next year. This debate is likely to keep Gold in check for the time being and preclude any significant recovery,” Commerzbank analyst Carsten Fritsch said in a note.
Investors usually buy Gold to hedge against inflation, but currently, we had a different practice, and the focus remains on the dollar. The prospect of interest rate hikes positively influenced the U.S. dollar, and the most significant force behind the Gold price slide is the appreciation of the U.S. dollar.
The global business activity is recovering, and those whose interest is to invest in precious metals like Gold should have the U.S. dollar on their “watch list.” On the other side, the global COVID-19 pandemic still poses downside risks to the recovery, and if the U.S. dollar loses its value in the upcoming days, it could help this precious metal to stabilize again above $1800 resistance.
The new coronavirus in Britain signals that a battle against the pandemic is not over and concerns over the pace of vaccination campaigns in many parts of the world still represent an issue. Gold is considered a safe-haven asset, and the price of Gold should advance if the situation with pandemic get worse as investors look for safer places to invest their money.
Technical analysis: Gold has weakened from its monthly highs
Those whose interest is to invest in commodities like Gold should consider that the risk of further decline is still not over.
Gold has weakened from its monthly highs, and if the price falls below $1750 support, it would be a firm “sell” signal, and the next target could be around $1700. The important resistance level stands around $1850, and if the price jumps above this level, it would be a signal to trade Gold, and we have the open way to $1900.
Summary
Gold price weakened from its highs registered in the first week of June as the appreciation of the U.S. dollar negatively influences the price of this precious metal. For now, there is still no clear trend, while the $1750 and $1850 represent important support and resistance levels.
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