Gold Bugs Suffer Exhaustion Amid Rebounding Greenback
Short-term losses for the precious metal gave way to dismay as the dollar rebounded as talk of a Federal Reserve stimulus taper gave way to euphoria for longs following the dismal jobs report for August.
New York’s Comex closed down $7.90 to settle at $1,792 an ounce. This is the largest decline since July 29. The week ended with a drop of 2.3%. Comex gold also lost for the first time since the end of July.
As inflationary pressure in an economy trying to get out of the shackles of the Coronavirus pandemic grew unrelentingly, Friday’s drop in gold was partly driven by August producer price increases of 8.3 percent, the most in over a decade.
The timing of reining in central bank stimulus and raising interest rates has been hotly debated in recent months, as economic recovery conflicted with the emergence of a resurgent Coronavirus variant, Delta. Although economists’ estimates of U.S. job growth for August were 70% below their targets, there was a significant weakness in the argument for tapering.
The next announcement from the Federal Reserve will most likely influence gold traders. A meeting of the Federal Open Market Committee (FOMC) is also scheduled for September 21-22.
A mixed global economic backdrop continues to put downward pressure on gold prices below the $1,800 mark. Precious metal gains are restrained by the strength of the dollar.
Following the European Central Bank’s (ECB) decision to keep key rates unchanged and to dim some of its massive emergency pandemic support, investor sentiment took an axing.
The steep decline in prices was capped by the drop in US Treasury yields. In addition, the rapid spread of the Coronavirus delta variant and its impact on the global economy continue to lend support to the recovery near the lower levels.
It is still a struggle between bulls and bears around $1,780 an ounce, and analysts believe that if COVID-19 Delta continues to ravage the world, gold will surge toward $1,900 an ounce.