Gold Challenges Key Support

Thursday, 29 June 2023 at 3:30 pm CST |

Gold Challenges Key Support at $1,900

Gold spot prices hit a new three-month low this week. Investors saw a brief reprieve from the bearish market on Monday amid concerns following the failed Russian insurrection. Gold’s price once again fell early Thursday morning, challenging a key support line at $1,900. The most significant price action happened around 8:20 AM, when gold momentarily tripped below the $1,900 support and fell to around $1,890 per troy ounce. 

Prices for the precious metal have been volatile this week. Spot trended upward for a period on Monday as investors responded to threats of political insecurity in Russia, the world’s second-largest gold producer. Following a correction, prices have declined. Some analysts point to positive investor sentiment in the strength of the U.S. Dollar. Federal Reserve Chair Powell called the U.S. economy “quite resilient” and projected a slower interest rate increase moving forward. 

U.S. Economy Strengthens, Driving Gold Down

Spot price for gold bullion dipped below $1,900 for the first time since March this morning, reflecting diminished investor interest in gold as a safe-haven asset. Gold’s price has historically been negatively correlated with global economic security. Strong economic signs in the United States may be driving gold’s bearish run.

News that interest rates may continue to rise is troubling for gold, which is traditionally seen as a hedge against inflation. Gold bullion is a non-yielding asset, so it might be less appealing to investors as interest rates continue to climb. Consumer confidence in the U.S. also remains extremely high, reaching a 1.5-year high earlier this week. Performance of traditional assets during highly confident economic times tends to be positive. Precious metals don’t benefit from the rising interest rates being floated by central bankers, so some investors might view traditional, interest-yielding investments as more attractive counters to inflation. 

The status of climbing interest rates is still unclear. Central bankers from several major world economies spoke yesterday at the Central Banking Forum to discuss the prospects of further raising interest rates. While gold’s dip below its 3-month $1,900 support might be a troubling sign, analysts are unsure if rising interest rates are here to stay. 

Investors Remain Optimistic

Gold prices recovered quickly from the sub-$1,900 dip today, suggesting that the market might avoid staying below the key psychological support line. Kinesis Money reported on the hawkish decline from this morning, tweeting that “the prospect of more interest rate hikes” caused the decline. 

[#GoldPriceNews] The prospect of more interest rate hikes sees gold fall to $1900, but will it fall further? ????

Read the latest #gold news from @rupertrowling ????https://t.co/nJGeA1tJN8

— Kinesis Money (@KinesisMonetary) June 28, 2023

Some bullion speculators remain bullish on the precious metal. One analyst remarked that the bearish signs in the gold market might signal an upcoming bull run. The uncertainty surrounding interest rate hikes also make gold’s price future tough to predict. Recent price movements have been primarily based on speculation about interest rates and consumer confidence. It’s impossible to know what Jerome Powell and other central bankers will do, so analysts are unable to make truly accurate price predictions. 

Will gold break the $1,900 barrier again, or does today’s price correction signal a rebound for the precious metal? Only time will tell. 

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