Gold (XAU/USD) hit a 2 week low on Friday and on Monday trading the price stabilised however it was struggling to gain significant upward momentum. The precious metal was trading at levels around $1845 at the time of writing (12:00 pm).
The dip came after Gold had recently hit a 9 month high, with investors wary of inflation around global economies. This has helped the risk-off sentiment which has brought investors back to commodities. Where will Gold trade next? Will it continue to fall or will it rebound strongly from this dip?
The dollar has shown some strength with some expectations of Fed tightening coming sooner than expected. Undoubtedly, the Fed’s next move will weigh heavily on both the dollar and gold. So far, they have held the view that inflation is ‘transitory’ but the latest inflation report from the US which showed the highest rise in 2 decades has tested this claim. This is one of the key reasons why investors have flocked back to a commodity that has traditionally been known as an inflation hedge.
FOMC minutes will come in on Wednesday alongside other significant US economic data. Investors will be eying these releases closely to see how they affect the general sentiment. For now, it appears that Gold is taking a breather after an impressive run-up. Resistance remains strong around the $1848 level. A break below the low of $1839 could see further drops.
Equities have been on a strong bull run for most of the year, but gold has largely lagged behind. With the backdrop of looming inflation, some investors may feel as though it is due a run-up. Sentiments can change quickly and we will keep you updated with the latest developments.