Written by Parani Krishnan
Investing.com – Support at $ 1,800 an ounce was the last target for bears before tightening their absolute control over the yellow metal, dropping it below its lowest levels since last November. Gold prices fell on Thursday, amid a selling wave initiated by positive labor market data indicating an improvement in the economic situation under the Biden administration, which will approve huge stimulus packages.
April delivery prices closed down $ 46.05, or 2.5%, to reach 1,789.05, amid a strong rise in the US dollar index against the basket of currencies in which it is weighed.
To add to the upward pressure on the US dollar, we have seen a strong rise in US yields, with the 10-year Treasury note up 1.158%. This combination of a strong dollar, and high Treasury yields are pushing down.
On the Forex Live blog, Greg Mikhalovsky says: “The gold price provides strength for the US dollar.” Despite the stimulus package, record domestic debt, and a strong budget deficit, the relationship between the dollar and bonds is now the price driver.
Usually gold is the vehicle to hedge against a growing debt.
But since gold reached $ 2,090 an ounce at the beginning of last August, gold continued to suffer from one decline after another, until the news of the Corona virus vaccine came out, and the economy recovered from the first closure.
And he did not find that the world felt the effects of the economic recovery until it was hit by a second lighter closure, amid rising cases of infection and deaths, and the distribution of vaccines slower than expected. But those factors stand in the way of you in the face of the currency, not in the face of debt traders, because they increase the growth of the GDP, and the easing of stimuli from the Federal Reserve, although the Fed confirms every time that it will not do this.
Thursday’s data showed a strong recovery in the labor market compared to December, with jobless claims falling by 4%, making this the third week of decline, indicating a slight recovery in the labor market. Democrats support President Joe Biden in his bid to approve the planned $ 1.9 trillion stimulus package, despite Republican opposition.
Technical patterns indicate that gold may be able to return to $ 1,800 an ounce.
“Gold has become in value territory, with a new decline in spot contracts to $ 1,784,” says Sunil Dixit. “From here it can appear buyers of value to reverse course.”
But still some, like Ed Moya of Oh ADA, believed the stimulus package might restore the sparkle to gold, and give him some support.
However, the technical indicators are very negative, as we mentioned this morning:
According to Jim Wyckoff from Kitco, the level of $ 1,800 an ounce has turned into a resistance level, and the next bears’ target is $ 1,771 an ounce.