Gold Prices Fall Further On Dollar Strength

Gold prices continued to trade weakly during the course of the last 24 hours as the Fed rate hike announcement and the accompanying hawkish statement from them has set the tone for the markets over the short term. We had mentioned in our forecasts before the announcement that if the Fed did hike rates and also signaled further rate hikes during the course of the year, then it would lead to a crash in the prices of gold and thats what we have seen as the gold prices have fallen from above 1280 to below 1260 over the last couple of days and seems to be moving towards the next support target of 1248 in the short term. We might see a bounce back towards the 1260 region from there but the gold prices would continue to remain weak in the short and medium term.

Gold Likely to Remain Weak

If the gold reverses further then we could see the prices drop through the 1248 region which would then mean that we could be back to the familiar support region of 1220. The rate hike and the hawkishness from the Fed has increased the prospects of better returns for investments in the dollar and that is the reason why we are seeing investors pull out their funds from lower return generating safe havens like gold and silver and pushing these funds into the stock markets and the dollar as well. This trend is likely to continue as long as the data from the US comes in decent. We have noticed that the recent data from the US has been bad which could be the only spanner in the works as far as a further ate hike this year is concerned.

Oil prices continued to trade quietly near the lows of the range after crashing lower due to the weak inventory data that came in from the US which showed a lesser draw than what was expected. This has softened the oil prices in the short term but now the oil prices rest near a very strong support region, a region which has seen the oil prices bounce off several times over the last year or so and that should give some hope for the oil bulls in the short term. But unless the production and inventory data support the prices, it could be an uphill battle.

Silver prices also continued to drop lower, in line with what the gold prices are doing, as the funds continue to get pulled out of safe havens like gold and silver. This is likely to push the silver prices towards the $16 region in the short term as the pressure on the prices continue.