Over the past week, gold has crashed, sliding below the psychologically important level of $4,000 per troy ounce for the first time in months.
The latest Federal Reserve (Fed) meeting did the most damage, as markets have since begun to price in the very real possibility of rate hikes by year-end, which is not good for the precious metal. As a result, the greenback has risen to multi-month highs, making dollar-denominated assets even more attractive. Non-yielding gold pales in comparison to government bonds and other options with fixed income, steadily losing its investment appeal.
Besides, market participants are now bracing for a “higher for longer” scenario from the US central bank thanks to sticky inflation. In response, several traders have started reducing their positions in gold and reallocating capital into USD-based assets. These conditions dampen investment demand for bullion, limiting its chances to recover in the near term.
From a technical perspective, the recent drop below $4,000 put additional pressure on gold prices. If they consolidate beneath this threshold, it could confirm sluggish demand for the metal and hint at a further decline. Under this scenario, the next critical support zone lies at $3,900 per troy ounce.
The final recommendation:
— Sell gold at the current price, aiming for $3,900 within a couple of weeks.
— Place Stop Loss at $4,025, slightly above resistance, to manage risks if the market plays against us.
This content is for informational purposes only and is not intended to be investing advice.
