Since faltering short of $1,350 in mid-July, gold has been steadily declining with lower highs and lows in the price indicating steady distribution. A downtrend in the RSI that has taken it well below the 50- level also indicates that momentum has been turning increasingly downward. Today. Gold has been slammed down by over $20.00/oz by a soaring USD which has been steadily recovering over the last several weeks. The greenback’s resurgence has been powered by speculation that a strong US economy combined with rising employment and inflation could force the Fed into starting to remove stimulus more quickly than previously expected. By breaking $1,270, gold has kicked off a new downleg that could potentially retest the June low near $1,240. Gold has the potential to be active in the coming days on US data with nonfarm payrolls and other key announcements on the way. Gold may also be active in the coming weeks. While gold has historically been measured against USD, in recent years, it also has been sensitive to changes in the ECB balance sheet and capital flows in and out of Europe. In addition to the ongoing political and economic turmoil in Europe, the way gold reacts to Thursday’s ECB meeting and this month’s ECB targeted LTRO issue may indicate which factors are likely to be the biggest movers behind the gold price for some time to come.
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