Gold prices are “vulnerable” after the $ 35 drop

(Kitco News) Gold has lost last week’s gains as prices fell below $ 1,800 an ounce on Tuesday as a stronger US dollar and higher US Treasury yields they pressed the precious metal.

The market predicts that the Federal Reserve may continue to ignore rising inflation after a major shortfall on the U.S. employment front.

“Gold prices fell as Treasury yields soared in anticipation of a delayed recovery that would allow the Fed to tolerate higher inflation in the short term,” said Edward Moya, senior analyst of the OANDA market. “Wall Street is increasingly concerned about inflation and the possibility that the Fed is likely to decline in December, the curve will narrow and that should be negative in the short term for gold.”

December’s Comex gold stood at $ 1,800.20 for the last time, down 1.83% on the day, while the 10-year Treasury yield stood at 1.36%. and the US dollar index at 92.47.

The August U.S. job report revealed that only 235,000 jobs were added instead of the projected 720,000.

“Along with the resurgence of Covid, it is likely to rule out any possibility of a September Fed cut, but November still looks good,” ING international economist James Knightley said.

The slowdown in earnings could mean a more patient Federal Reserve in the future, especially with regard to the expected reduced announcement.

“The gain of 235,000 NFP was very disappointing … However, it is not entirely clear whether this is a matter of supply or demand for the labor market. Due to this uncertainty, we have retreated l ‘Fed’s expected reduced announcement from September 21 to 22 FOMC meeting at the November 2-3 meeting, “said Win Thin, head of BBH’s global currency strategy. “There will be some debate in the market about whether the Fed will start shrinking at the Dec. 14-15 meeting or whether it will wait until Jan. 25-26.”

The nearly $ 35 gold drop on Tuesday represents a significant 1% investment from last week. And at these levels, the precious metal is “vulnerable” to new sales, Moya added, noting that the current bearish sentiment is temporary.

“[The precious metal] it could go down to $ 1,755, and if that level breaks easily, one last lower boost could see prices reach the $ 1700 level, “Moya said.” Once the market can see past months of price pressures, the reality of global disinflationary forces is likely to abruptly end the higher movement of Treasury yields, causing the resumption of gold buying for many investors. ” .

This week, markets will pay close attention to the decision on the European Central Bank (ECB) interest rate on Thursday and whether there will be any new reduced announcements.

“Focus on the ECB’s budget and budget the latest reliable comments (expected to announce a slower pace of bond purchases from the fourth quarter given negative inflation and a debate on when to turn off crisis mode) “There should be (upward) implications for the EUR if the ECB shrinks ahead of the Fed until the end of the year, which would continue to keep commodity inflation in play,” he said. Nicky Shiels, head of metal strategy at MKS PAMP GROUP.

There will also be Fed speakers on Wednesday and Thursday on the radar and U.S. macro data releases, including the latest U.S. PPI numbers.