Market analyst Joel Frank reminds that spot gold prices fell in recent trades amid a risk in short-term interest rates caused by the hawkish Fed speech, and states that they fell to new two-week lows below $1,850. The analyst is investigating the reason for this in the light of developments in the market. we too cryptocoin.com We have compiled the analyst’s evaluations on gold prices for our readers.
“Gold prices consolidate in a pennant structure”
Spot gold prices fell below key support in recent trading, coming under pressure from the rise in short-term US interest rates, according to analyst Joel Frank. The analyst states that after a much warmer-than-expected US inflation report, prices that rose last week with the demand for hedging from inflation consolidated in a pennant structure. However, on Friday, spot gold broke south of this pennant, triggering a technical sell-off event that pushed gold prices below last week’s low of $1,850. Joel Frank continues his analysis:
Having hit new weekly lows around $1,844, prices are now consolidating just south of the $1,850 level. The golden bears could now target a move towards the next key resistance area near $1,833.
The Fed is getting more and more hawkish
According to the analyst, the downside technical breakout coincided with a sharp rise in short-term US interest rates (as well as a rebound from lows along the US yield curve), triggered by hawkish Fed comments. 2-year rates fell by 0.45% to 5 basis points on Friday, but have now turned flat around 0.50%. The 5-year TIPS rate rose 6 basis points to -1.85%, while short-term real rates also rose on Wednesday. Higher interest rates increase the opportunity cost of holding inefficient precious metals, thereby negatively impacting demand for gold.
According to the latest developments from the Fed; Governor Christopher Waller has called for an accelerated tapering and said rate hikes could be appropriate from the second quarter of 2022. Shortly after, Richard Clarida, the influential Vice President of the FOMC, indicated that it might be appropriate to discuss an accelerated tapering in December. Many more FOMC members will appear next week. Market participants will seek to assess the Committee’s appetite for an accelerated tapering in quantitative easing and earlier rate hikes.
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