The recent decline in the price of the US dollar has helped the gold market rebound higher, reaching resistance at $ 1,820 before settling around $ 1,805 as of this writing. Gold futures seek to build and maintain some momentum as we approach 2022. Gold rose sharply above $ 1,800 during the last week of trading of 2021. But what? is what motivates the modest rise in the prices of gold and silver? It could all be due to the strength of the US dollar and Treasury yields.
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Gold is looking to recoup some of its losses in 2021, down around 4% since the start of the year. As for the price of silver, the sister commodity of gold, it is trying to climb above $ 24. White metal had a terrible year, dropping nearly 12%.
In recent weeks, investors have taken on US government debt, which has weighed on Treasury yields, which may not bode well in an inflationary environment. The US Treasury market was mostly in the red on Tuesday, with the 10-year bond yield falling to 1.462%. One-year bond yields rose to 0.302%, while 30-year yields fell to 1.864%.
A low-priced market is generally good for precious metals because it lowers the opportunity cost of holding unproductive bullion.
As the US dollar struggles to move, the US Dollar Index (DXY), which measures the performance of the US currency against a basket of major rival currencies, fell to 96.00. The US dollar index (DXY) had an excellent year with an increase of almost 7%. Low profit is also beneficial for the metals market as it makes it cheaper to purchase dollar denominated commodities for foreign investors.
However, market analysts warn that the outlook for gold is bleak due to the possibility of a price normalization by the Federal Reserve. The US central bank expects three interest rate hikes next year as it accelerates the rollback of stimulus and relief measures from the pandemic era. As for other metals markets, copper futures fell to $ 4.4665 per pound. Platinum futures reached $ 986.80 an ounce. Palladium futures reached $ 1,933 an ounce.
Gold prices recently hit their highest level in a month after the number of Covid cases worldwide hit an all-time high. However, despite rising inflation and geopolitical factors that have supported demand for the yellow metal, the Santa Claus rally and strong dollar have hampered further progress. Over the past three weeks, gold bulls have been able to temporarily regain control of the general and dominant trend in an attempt to push price back towards the 38.2% Fibonacci retracement at $ 1,835. And while the downward trajectory from the August 2020 high is currently still in place, price has passed the 50-week moving average, which currently provides support at the key psychological level of $ 1,800.
Over the daily period, the price action stopped at the 50% retracement level which still offers resistance to the impending move at $ 1,818. As the ups and downs clash, the Commodity Channel Index (CCI) has moved out of the normal range, a possible indication that the XAU / USD gold price may be in overbought territory.