Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

The Good News For Gold
By: Stewart Thomson

We Need a Free Market in Interest Rates
By: Keith Weiner

US and Global Market Internals
By: Gary Tanashian

Will Gold Prices Soar after March 2019?
By: Arkadiusz Sieron

The Post Bubble Contraction Thesis Receives Validation (Part III)
By: Plunger

Whose Trillion is it Anyway?
By: Andy Sutton and Graham Mehl

The Best Time to Prepare Is While the Bull Runs
By: Frank Holmes

Gold Set to Soar Above $1,300 Ė Goldman and Bank of America
By: GoldCore

Asian Metals Market Update: Sep 25 2018
By: Chintan Karnani, Insignia Consultants

Ira Epstein's Metals Video 9 24 2018
By: Ira Epstein

 
Search

GoldSeek Web

 
Mayday, Mayday, Gold Is Sinking!


 -- Published: Tuesday, 22 May 2018 | Print  | Disqus 

Gold dived below $1,300 last week, to many analystsí surprise. They are panicking right now. But you do not have to. Letís read our article and find out what is happening in the gold market!

 

Didnít we tell you?

We donít want to be like these annoying guys who always utter ďdidnít we tell you?Ē. But, well, this is our job after all: to provide you with the finest fundamental outlook of the precious metal market. And here is what we wrote in Gold News Monitor on May the 15th:

 

The weak rebound in gold prices last week suggests that gold has some work to do on the downside. Similarly, the fundamental outlook is rather bearish in the medium term, at least more bearish than a few weeks ago. We mean here that the stock market correction has not turned into a crisis and the risk appetite has increased. The worries about trade wars have diminished, while inflation remains in check. If interest rates continue their upward move and their correlation with gold returns, the yellow metal will get into hot water.

 

And the very next day, the price of gold sank below $1,300, as you can see in the chart below. You may call it a coincidence, but I would say that it was a comeback of a key gold correlation, of which we had warned our Readers.

 

Chart 1: Gold prices (London P.M. Fix) over the last twelve months.

http://www.goldseek.com/news/2018/5-22as/1.png

 

What Happened?

In short, the U.S. dollar rallied (see the chart below), which finally forced the yellow metal to react to the surging real interest rates. On Monday, the American currency hit a five-month high due to the U.S.-China trade war relief, as the chart below shows. So the bear market in gold continued.

 

Chart 2: EUR/USD exchange rate over the last twelve months.

http://www.goldseek.com/news/2018/5-22as/2.png

 

As a reminder, the big news over the weekend was the possible deal made with China and the United States on the trade wars and tariffs. Beijing and Washington issued a joint statement after intensive trade talks in which China agreed to significantly increase its purchases of U.S. goods and services Ė in particular, energy and agricultural commodities Ė to reduce the $335 billion annual U.S. goods and services trade deficit with China. And following the statement, U.S. Treasury Secretary Steven Mnuchin declared the U.S.-China trade war ďon holdĒ. It supports the risk appetite, which is negative for the gold prices.

 

Implications for Gold

The current goldís outlook seems to be bearish. The trade wars diminished, reducing the safe-haven demand for the yellow metal. Inflation is still moderate in America. U.S. interest rates are rising (the 10-year yield has broken above 3.05 percent for the first time since 2011), making the greenback more attractive versus its major peers. And the Fed is expected to further raise the federal funds rate at the next meeting.

 

Moreover, concerns over fiscal policy in Italy are also weighing down on euro against the U.S. dollar (not to mention the fact that expectations of the ECBís interest rate hike have been pushed back to mid 2019). We will elaborate more on Italy in the upcoming edition of the Market Overview.

 

Hence, gold plunged below the psychologically important level of $1,300 per ounce, marking a new low. Now, the question is: should we expect more weakness in gold? Well, we have no crystal ball. However, the medium-term outlook does not look encouraging right now. Actually, an irresponsible U.S. fiscal policy seems to be the only bullish goldís driver in operation right now.

 

Based on recent goldís history, we would say that gold may be under pressure until the FOMC meeting next month. But a lot will depend, of course, on the Fedís communication, Trumpís rhetoric and actions, and the dollarís performance. Gold is not sinking, but it flows into the restless sea. Stay tuned!

 

Thank you.

 

Arkadiusz Sieron

Sunshine Profits - Free Gold Analysis

 


| Digg This Article
 -- Published: Tuesday, 22 May 2018 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2018



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.