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Gold prices are likely to facilitate a deeper pullback after the price action broke below the $US1,800 per ounce today.
Fundamental analysis: Dollar moves higher
Commodity experts were talking this week that gold prices may move lower as bulls liquidate their yellow metal holdings. Peter Hug, Kitco Metals global trading director, said higher premiums could put pressure on the bullion’s price, given that the US Mint has stopped production of its American Buffalo bullion coins.
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“Retail investors are becoming less enthusiastic about chasing premiums in both silver and gold. There has been a hiatus in the physical buying market over the past few days,” Hug said.
Also, Asian gold buyers will not be as involved in the market this week due to Lunar New Year holidays, which could weigh on the physical gold market. Consumption of gold in China plummeted by 18% year-on-year in 2020 to 820 tonnes, while the gold production slipped by 4% last year to 479.5 tonnes.
Furthermore, the Australian dollar has been growing stronger against the USD, something that could negatively impact gold prices in Australian currency.
Market analysts believe that the U.S. dollar price of gold could break above the $US1,800 per ounce as the metal continues to underperform other assets.
“It is surprising in some way if you look at the performance of crypto,” said Sean Lusk, co-director at Walsh Trading.
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Technical analysis: Approaching key short-term support
Gold prices are on the way to have the worst weekly performance in nearly 3 months. The yellow metal price fell over 1% yesterday, before adding a further 1.2% today. As a result, the price action has broken below the $1,800 mark today.
The bears are now closing in on the November 2020 low of $1,765 an ounce. A break below this mark would pave the way for a deeper correction towards $1,685, where the 61.8% retracement line is located, offering a solid opportunity for gold buyers to get on the long side.
Summary
Gold prices are moving below $US1,800 per ounce as bears gain traction amid stronger dollar.
