Gold Prices Hanging By a Thread

Gold prices have been the biggest movers as of this morning as the prices continue to trade weakly, which has been the trend since the beginning of the last week. It may come as a surprise to many to see the gold prices very weak despite the fact that the dollar is on the backfoot and also despite the fact that the other instruments like the euro and the pound have been able to make some significant gains against the dollar. But the gold bulls have been a large disappointment as they have failed to carry the gold prices over 1260 since the beginning of last week and the gold prices have been on the losing side over this period and in fact, the prices are threatening to break through the range lows as of this writing.

Gold Prices Testing Support

The main reason for the weakness in the gold prices has been due to the fact that many of the major currencies like the euro, the pound and the CAD are well supported by their respective central banks who have strongly hinted at a reversal in their rate policy and their QE policy as well. With the dollar also in the middle of its rate hike policy, it is clear that the yields from these currencies are bound to get higher in the short and medium term. This has encouraged the traders and especially the investors to pull out their funds from low yielding assets like the gold and silver and push them into higher yielding instruments like the euro and the pound and this is likely to continue in the short term. This is likely to bring in further pressure on the gold prices which could fall to the 1220 region in the short term once the range lows break.

Oil prices continue to recover strongly as the concerns over supply continue to dominate the markets as the conflict in the Middle East shows no signs of abating. We had mentioned in any of our forecasts that the lows of the oil prices are in and that we could safely expect the oil prices to continue to move higher steadily as we believe that some of the countries involved in the escalation of tension in that region would want this to happen and would prefer to see the oil prices close to $60 rather than lounge about in the lows as it was doing a couple of weeks back. Any pullback in the prices should be viewed as an opportunity to go long.

Silver prices have managed to stay afloat so far though, like gold, they are clearly under pressure due to the rising yields in the different parts of the world. We are likely to see the silver prices move lower in the short term.