Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Gold Down 2% on Week and Under $1800 as Fed Bites Longs

CommoditiesJan 28, 2022 03:37PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

By Barani Krishnan

Investing.com - The two-week long party in gold has proven to be exactly that: two weeks long.

Bulls in the precious metal trying to hold on the $1,800 handle and reach for $1,900 next saw their hopes dashed by a Federal Reserve that took a big bite out of the gold market with its super-hawkish monetary policy to wade the U.S. out of the worst inflation crisis in decades.

“The $1,800 level was a key support level for gold, so momentum selling has the potential to make this an interesting trade,” said Ed Moya, analyst at online trading platform OANDA. “If it gets ugly quickly and $1760 breaks, gold may not see much support until $1720.”

Gold futures’ most active contract on New York’s Comex, April, settled down $8.40, or 0.5%, at $1,778.80 an ounce. Over the past two sessions, the benchmark gold futures contract fell just shy of $60 in total. That handed the contract a weekly loss of more than 2%, virtually wiping out the back-to-back gains of the past two weeks.

The Federal Reserve unveiled this week a new hawkish era for U.S. monetary policy, with Chairman Jerome Powell not discounting the possibility that U.S. interest rates might go up every month this year after the first pandemic-era hike is in, possibly in March.

The Fed dropped interest rates to virtually zero after the Covid-19 outbreak of March 2020, and kept them for over 20 months. Powell and other central bank officials say a series of rate hikes will be needed now to curb price pressures ramping up as a result of the trillions of dollars of pandemic relief spending and supply chain disruptions caused by the crisis.

Gold has always been branded as a hedge against inflation while rate hikes are typically negative for the yellow metal.

But even prior to its January run, gold has had trouble living up to its billing as an inflation hedge as the Dollar Index and U.S. Treasury yields often spiked in anticipation of rate hikes.

That appeared to initially change when the yellow metal broke past the $1,835 resistance more last week and managed to hover around there.

“The breakout above $1,850 was actually a fake-out scripted by the bears in the backdrop of Fed's hawkish tone that turned tables on the bulls, pushing gold down to $1,791,” said Sunil Kumar Dixit, chief technical strategist at skcharting.com and a long-term follower of gold charts.

Dixit said gold’s weekly stochastic reading of 60/69 made a negative crossover below the 70 line, supported by a downward pointing Relative Strength Index that showed domination by bears in the market.

He added:

“It looks like the rout is far from over as the weekly close below $1,797 — which is a 50% Fibonacci retracement, measured from the $1,678 low of March 2021 to the $1,916 peak that followed — may extend the bearish bias which will target $1,785, $1,770 and $1,753 initially.”

On the other hand, gold’s daily stochastic reading of 11/32 was approaching oversold territory, said Dixit.

“This may start a short term reversal by mid of next week, causing a bounce back in gold prices to retest the $1,818-$1,825-$1,835 levels.”

Despite the near-term odds stacked against gold, some analysts remain hopeful that the metal will find vigor to approach record highs again this year if the U.S. inflation theme remains strong through 2022.

In 2020, gold got to all-time highs above $2,100 on the back of inflation concerns as the United States began its biggest budget deficit with the onset of the Covid-19.

But others say the challenges facing gold in the current era of US monetary policy should not be understated.

Gold Down 2% on Week and Under $1800 as Fed Bites Longs
 

Related Articles

Energy & Precious Metals - Weekly Review and Outlook
Energy & Precious Metals - Weekly Review and Outlook By Investing.com - May 22, 2022 36

By Barani Krishnan Investing.com -- The Federal Reserve is letting the stock market crash in order to bring U.S. inflation under control. If fuel and food prices continue rising,...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (7)
som sithy
som sithy Jan 30, 2022 9:21AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
cambodia hello
Doug Wildman
Doug Wildman Jan 29, 2022 6:23PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Gold or crypto? Duh.
Abhay Agrawal
Abhay Agrawal Jan 28, 2022 8:31PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Barani krishnan ji,with gold trading at the current levels if you were asked to buy or sell what would you prefer.your answer will reflect your thoughts for me.please reply
Chad RicherThanYou
Chad RicherThanYou Jan 28, 2022 8:01PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Gold is a screaming buy
Matt Brackley
Matt Brackley Jan 28, 2022 5:44PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
what are real rates?
Shep De
Shep De Jan 28, 2022 5:06PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
nah, gold is fine. FOMO will raMP as....inflation rAMPS. Mark this post . Tech entering growth cycle downturn to from Covid *****tech, played games, gaming, movies, forced to, from Feb. original Covid, no new games either. Yep, 100% , mark. this. post.gold $2777 by April 1, $3777 by June 1. Higher, too, $7777 Dec.
Stan Smith
Stan Smith Jan 28, 2022 4:54PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
With the help of certain bullion banks you should add. If PMs weren't suppressed during these volatile and inflationary times, they would be up over 30 times like they were in the late 70s when there were FREE markets and price discovery
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email