Gold Price Analysis – Gold Continues to React to Rates on Friday

Gold Technical Analysis

The gold market has gapped lower to kick off the session on Friday, as we have fallen down pretty drastically, especially with interest rates just screaming higher in the United States. That, of course, is an area of concern for gold that continues to really punish the bulls.

As interest rates rise, it makes non-yielding assets such as gold a lot less attractive. If we do bounce from here, then the market could go looking to the 50-day EMA near the $4,728 level. But I think at this point, we need to see some type of shift or some type of headline to get rates dropping again. This has been the pattern, and will more likely than not remain so.

Interest Rates and Bond Market Correlation

One thing’s for sure, there is a lot of uncertainty out there and it seems like anytime we do get some good news, it is followed by a lot of bad news. I think that continues to be the story here, that gold is losing at the hands of an overly concerned bond market that is pricing in significant energy inflation.

If we break down below the $4,500 level, I think gold at that point in time really gets whacked. We probably see massive spikes in interest rates as well. The correlation between the two is extraordinarily strong and you need to pay close attention to it. All things being equal, this is a market that will be very noisy, but the interest rates in the United States will be a secondary market that you can watch closely to sort out where we go next.

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