Dec 09, 2023

Gold surged to $2,150 this week and then dumped to $2,000 in one of the most volatile weeks. 

Gold-–-Daily-Chart

Gold – Daily Chart

With a range in play, the next target for the price of gold could be $1,811. A strong push above the resistance would be an open door for more considerable upside. 

In recent weeks, investors have been growing in confidence that the US Federal Reserve has successfully controlled inflation and may start to cut borrowing costs as early as March 2024. 

Higher interest rates affect yields for assets such as US Treasuries, which brings investment. But, with the recent dump in interest rates, treasury demand has been less. 

The other problem is that investors consider that the United States is being downgraded and is no longer the fiscal haven it was. If yields drop, it would be hard to find buyers for the country’s debt, and a significant Federal Reserve stimulus would likely occur. 

“The expectations of the end of the tightening cycle have been priced in, pushing longer-term yields lower,” said Daria Efanova at Sucden Financial. “This has created a more favourable environment for gold as a non-yielding asset.” 

The other issue surrounding gold has been the geopolitical outlook.  

“The geopolitical risk environment appears to have changed,” John Reade said at the World Gold Council. “Not just with Russia and Ukraine, not just the terrible things going on in Israel and Gaza, but trade tensions between the US and China, concerns about what will happen in the South China Sea, concerns about what China will do in Taiwan.” 

JPMorgan CEO Jamie Dimon recently said this may be the most dangerous time the world has seen in decades.

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