Gold Weekly Price Analysis – Gold Drops for the Week with Rates Rising

Gold Markets Weekly Technical Analysis

The gold market has fallen quite a bit this week, although it should be noted that we are not necessarily falling apart. It just comes down to the idea that interest rates have been moving a bit and with that being the case, it does have an outsized influence on gold. With rates rising, it just makes a non-yielding asset like gold a lot less attractive.

While many of you don’t seem to comprehend the fact that it is not just about the safety trade, but it is also about the fact that there’s an energy inflation concern out there. The reality is gold isn’t just about there’s a war, so buy it. It’s never that simple and unfortunately, that is a lesson that many retail traders have been learning.

Energy Inflation and Federal Reserve Policy

There is a very strong correlation between interest rates and gold at the moment and that tells me that people prefer some type of return guaranteed over the idea of paying storage for gold and not getting any yield. This is an environment where there are a lot of concerns about energy inflation causing headaches and that will keep the Federal Reserve tighter for longer, hence higher rates.

As long as this is the way forward with higher rates, gold’s going to struggle. That being said, the $4,600 level is an area that seems to at least try to support it. So, I think the best-case scenario is that you have about a $300 consolidation range. Worst-case scenario, we could continue to drop towards the $4,200 level, especially if those rates start to peak yet again.

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