Gold continues to lose luster due to surging real yields, states XAU/USD price forecast

4 October 2023, Wednesday
Gold continues to lose luster due to surging real yields, states XAU/USD price forecast

Gold Prices Continue to Decline as US Dollar Strengthens


Gold prices have been going down for the past 8 days because the US dollar is getting stronger. This is because some people from the Federal Reserve (the central bank of the US) have been saying that they might increase interest rates soon. Also, there was a surprise increase in job openings in the US, which shows that the job market is doing well. This makes people think that the US economy is strong and could lead to higher interest rates. All of this is putting pressure on gold prices.


What’s Happening with the Federal Reserve?


One person from the Federal Reserve, Mester, said that if the economy continues to do well, they might increase interest rates at their next meeting. Other officials from the Federal Reserve will also be speaking today, and some of them agree with Mester. This is making gold prices go down because it makes people think that interest rates will go up.


Why are Real Yields Important?


Real yields are the returns you get from investing in something after taking inflation into account. Right now, real yields are at their highest level since November 2008. This is not good for gold because it makes gold less attractive to investors. They would rather invest in something that gives them higher returns.


What to Expect Today


Today, there will be a release of the US ISM services PMI, which is a measure of how well the service sector is doing in the US. Since the US economy relies a lot on services, this is an important indicator. If the PMI drops a little, it could give some relief to gold prices if the actual data matches the expectations.


What Do Money Market Prices Show?


Money market prices are showing that more people think there will be another interest rate hike this year. At the same time, the chances of the Federal Reserve cutting interest rates have gone down. This could become more certain if the upcoming services and jobs data show that the economy is doing well.


What Do the Charts Say?


Looking at the daily chart, the price of gold is in extreme oversold territory. This means that it has been going down a lot and could be due for a rebound. However, just because it is oversold doesn’t mean it will go up right away. It could stay oversold for a while. The moving averages on the chart also show a cross formation, which means that the price could go down even more and reach the psychological support level of $1800 for the first time since December 2022.


On the weekly chart, the price of gold is currently around the 200-week moving average. This is an important level to watch because if the price goes below it, it could be bad news for gold. But if the price stays above it, it could be a sign that gold will bounce back.


What Are Retail Traders Doing?


Right now, most retail traders are betting that gold prices will go up. About 85% of traders are holding long positions, which means they think the price will increase. However, it’s important to remember that retail traders can be wrong, so we’ll have to wait and see what happens.