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Gold under pressure from US dollar index, bonds

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Chhea Chhayheng, business manager at PP Link Securities.

Gold under pressure from US dollar index, bonds

Gold prices signalled a bearish trend early this week – dropping from $2,020 per ounce and testing the key support of around $1,950 – due to a higher US dollar index and a rise in US bond yields.

Gold is moving in a downtrend in the one hour chart, with prices trading at $1,973 per ounce, up from a daily low of around $1,953 per ounce at the time of writing.

US bond yields have been increasing, with the 10-year note currently yielding 3.726 per cent after seven consecutive days of gains. Higher yields could be seen as one of the main reasons for non-yielding assets falling.

“Investors will closely monitor any statements from Federal Reserve officials and the minutes of the latest Federal Open Market Committee (FOMC) meeting to gain insight into the central bank’s future actions.

“On Friday, Fed Chairman Jerome Powell mentioned that there is still a long way to go to meet the inflation target.

“However, he acknowledged that the risks of excessive measures versus inadequate measures are becoming more balanced, indicating a less aggressive stance,” Investing.com reported.

Gold was moving in a downtrend in the daily chart, well below the average price at around $2,000 per ounce, and on Monday it tested the support since February of $1,950.

If the price of gold breaks the support it could drop to $1,900, the key support level.

However, as long as gold prices hold below the region of $1,970, the downside could still look favourable.

Gold’s next moves will likely be heavily dependent on the release of important economic data as the FOMC weighs action on interest rates.

Primary data that may predict a decision by the Fed include US jobs, non-farm payrolls and the Conference Board (CB) Consumer Confidence, the leading indicator of consumer spending, which accounts for a majority of overall economic activity in the US.

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