US Interest Rates Up Gold Down

The market had been looking for lower US rates to boost gold prices but as we can see on the chart below, we have the US 10 Year moving up and weighing on gold.

De dollarisation and Gold as Safe Haven

A lot of forecasters view gold as a safe haven but it isn’t but the USD is – in recent months we have seen a number of articles that are bullish on gold because the USD is about to lose its safe haven status.

If Geopolitical tensions and de-dollarisation persist, then some say bullion will keep shining. “Is this a new era? Simply, yes -The shift to gold is about creating a more neutral portfolio in response to geopolitics.” (Ruth Crowell, chief executive of the London Bullion Market Association.)

Its safe haven status is overhyped, but the USD is a proven safe haven dominating global financial markets and this wont change in the near future:

Gold is seen as a hedge against inflation but note how it rose in the period 2008 to 2011 when inflation rates were low - the reason it rose was simply a weak USD it was not safe haven buying or buying as a hedge against inflation

“Precious metal price forecasters are sometimes compared with those who sit in the fold-down seat facing backwards in London taxis — they can only see what has come, not what is ahead.” (FT NEWS) This has been true for decades with the view there is a new era for gold coming and then the price collapses. For example, Gold prices collapsed from a high of $1,920 in 2011 after the financial crisis to nearly $1,200 two years later. 

We could see a run-up in gold again but with speculators heavily long we would expect rallies to fade and lower prices to unfold

Technical Analysis

The key levels of support and resistance to look out for in our view are on the chart below.