Gold Prices Fall As Dollar Recovers
Gold prices have fallen to the support region at 1220 which is something that we have been mentioning over the past few days. We had said that the gold prices continued to look weak and that it was only a matter of time before the gold prices reached 1220 once the prices broke through the 1240 region and this happened within the last 24 hours as the prices broke through 1240 in the morning trading and the prices continued to get weak during the course of the day and eventually reached the strong support region of 1220 towards yesterday night. We expect the weakness to continue in the short term though there is a bounce likely from this region. The weakness in the gold prices was brought about by the dollar strength that was seen across the board as the dollar recovered during the course of the day.
Gold Enters Strong Support Region
Last week, we had seen the dollar on the backfoot as there was not much improvement in the data from the US and we also saw hawkish comments from the BOE and the ECB which helped the euro and the pound against the dollar. The gold prices were falling even at this point of time as the investors pulled out funds from low yielding instruments like gold and silver and pushed them towards the recovering euro and the pound in the hopes of better returns. It was a double whammy yesterday as the gold prices continued to fall even when the dollar recovered and there does not seem to be much hope for the gold bulls if the prices fall when the dollar is weak and they continue to fall when the dollar is strong as well. The market waits in anticipation of the bigger data events scheduled to be released later on in the week from the US and any weakness in the data could be the only thing that could help the gold bulls in the short term.
Oil prices continued their recovery during the course of the day yesterday as the prices broke through $47 briefly before settling back below that region as of this writing. We had mentioned a week back that the oil prices seem to have found their low and that the only way for the oil prices seems to be up and true to form, the prices have risen by around 10% since then. The crisis in the Middle East has raised supply concerns and this seems to be the driving force behind the uptrend for now. With the crisis showing no signs of abating, we expect the oil prices to continue to move higher.
Silver prices dropped towards the $16 region, in line with the drop in the gold prices. We have been warning of this drop over the past few days where our support target was in the $16 region and this target has been achieved over the last 24 hours. With the holiday in the US today, we can expect some consolidation and recovery for today.
This article was originally posted on FX Empire