Confidence that the economy is restored from the effects of Pandemic COVID-19, the day of day is strengthened. Therefore, prices for all commodities are striving for their "Doparamon" values. For gold, nothing can be worse.
Unlike oil or copper, gold reached a peak during Lokdauna or, more precisely, before breakthroughs in the creation of vaccines that gave hope that the end of the life was already close to which the world had to get used to the world last year.
From the lows of 2020, gold prices rose by more than $ 600 or 40%, almost reaching the maximum of $ 2100. Return to medium values does not just reduce the most brilliant gold fiction in modern history. It will also put under the impact of all those who keep long positions in the yellow metal on an increasingly gloomy "bearish" market.
At the moment, gold is already demonstrating the worst dynamics among commodities in 2021, cheaper by 11%. In second place on the importance of commodity losses this year is orange juice, cheaper by 9%. Ironically, it is oranges that are often called gold, which grows on the trees.
On Monday, spot prices for gold dropped to a minimum for 11 months, which makes up about $ 1676. Compared to a maximum of $ 2073 recorded in August last year, they fell at $ 396 or 19%.
At the same time, gold futures dropped to a minimum of April 2020 - $ 1673, cheapering $ 416, or 20%, compared with the historical maximum of $ 2089, recorded in August last year. If the price of goods on the market is reduced by 20% or more compared to a recent maximum against the background of common pessimism or the negative mood of investors, such a market is considered to be "bearish". Futures for gold already correspond to this definition.
Bulls of the Gold Market Launcher New Risks
However, if you look back, you can see that the price of gold fell to the pandemic and lower. For example, in March 2020, the spot price fell to $ 1452. And even earlier, in September 2019, it descended almost to $ 1,400.What is happening with gold can not be compared with any other of the most important commodities.
For example, WTI oil trades close to the maximum of October 2018, on Monday exceeding the value of $ 67 per barrel. The cost of copper approached a historical maximum equal to almost $ 4.50 per pound, which was recorded in September 2011. The price of soybeans is approaching the peak of 2014, about $ 14.60 per bushel. And coffee trades just below $ 1.40 per pound, close to the maximum of September 2017. All these markets seem to experience their "growth stories", corresponding to one of the fastest cases of restoring the economy after the recession.
The growth of the yield of bonds "kills" gold
Gold also has its own strong side. It lies in the likelihood of accelerating inflation due to the budget deficit and new billion dollars, which the Administration of Byyden will be punished in the economy recovery machine. For decades, gold was considered the best protective agent on inflation. Moody's Analytics Chief Economist Mark Zaddi warns that Wall Street significantly underestimates the seriousness of the return of inflation due to the incarnation of the Bayden plan to restore the economy. Zaddi says that inflation will affect all levels of business: from large technological companies to cyclical.
The problem of gold is that the yield of US governmentobaliations will be in the epicenter of any inflation, which will arise as a result of the restoration of the economy.
The yield of 10-year US governmentobaliations, which is considered for the Bond "reference", recently reached the highs of February 2020, interrupting the gold rally. The growth of the yield of the US Bonds also led to an increase in the dollar course, which is inversely proportional to the cost of gold. The cost of the dollar increased the loss of holders of long positions on the yellow metal.
Mark Zaddi believes that in the coming months, the yield of 10-year-old US government bonds is able to achieve such heights that even represent Fed officials.
Markets are often presented by surprises, and gold prices can return to growth at any time and without warning. However, at the moment it is not known to anyone at what level there will be a turn towards growth.
Algorithmic trade models of trade, which are bought and selling huge amounts of securities are bought and selling and selling, and the task of determining the "bottom" is also complicated, especially when numerous risky assets are performed as a landmarks.
The yield of bonds and the growth of the dollar's course is forced most markets to return to the dynamics of the preceding pandemic. In such a setting, gold becomes more and more difficult to take a breather.
The RSI index may be the best hoping of gold.
According to Sunil Kumara DiCita, Analytics SK Dixit Charting from Indian Calcutta, the Stocatical Relatant Force Index (RSI) indicates the extreme oversold of gold and the likelihood of return to the levels of $ 1800.
However, new painful losses are likely to this value:
"Monday fixed on Monday for spot prices at $ 1676.93 may not be limited to. "Bears" aimed at the level of a 100-week moving average, which is now at position $ 1648. It has a high potential to act as reliable support in a free fall situation that was observed in the market. "
According to DiCita, starting from this level, the rebound of gold prices to $ 1785 is likely, where 50-week exponential sliding average is located. Then gold can continue to grow to $ 1831 corresponding to a 20-week moving average.
"One thing can be said for sure: the RSI static index is deep in the territory of oversold at the values in the range from zero to three. However, the condition for the growth of spot prices will be kept above $ 1720. It will not be easy. Otherwise, a path to falling below is lower than $ 1648.
All rights to graphics belong to SK Dixit Charting
Jeffrey Holly, the operating market analyst Oanda for Asia countries agrees that the low value of the RSI index may be both evil and blessing.
"The only hope for a respite for gold is to reduce the RSI index on the territory of oversold. I guess that in the next few sessions, the fall in gold prices will stop at positions to $ 1680, until the markets evaluate the results of US Bond auctions.
At the same time, I believe that we are entering the trading situation in a certain range, and it is unlikely that gold will be able to rise in price above $ 1720 this week. The most likely scenario remains consolidation in the side trend, after which another significant fall to the value of $ 1600 per ounce will be followed.
Disclaimer. Bararan Krisnan gives the opinions of other analysts to submit a versatile market analysis. It is not the holder of the raw materials and securities reviewed in the article.
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