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Gold Price Forecast: XAU/USD heads into demand territory with force

 

  • Gold price extends the downside to test critical daily support.
  • US dollar and US yields continue to press higher, weighing on gold.
  • $1,680 is eyed in this regard as per the weekly chart.

    The price of gold is in a firm downtrend for the month of September for which it is extending on Wednesday to a fresh low against the US dollar of $1,724.52 while losing some 0.5% on the day by the time of writing. The price fell from a high of $1,745.53 scored in London.

    It is a US dollar story this week with the currency scoring a fresh 10-1/2-month peak against rival currencies as measured by the DXY index. Traders are getting set for a reduction in the US Federal Reserve‘s asset purchases by the end of the year and an interest rate hike that could come as soon as late next year.

    However, not only that, the markets are in a state of flux over politics, both home and away with regards to an impasse in Washington over the US debt ceiling, Evergrande and China’s economic outlook/(power crunch), as well as the risks to the global recovery from the Delta variant. The world’s largest reserve currency, the US dollar, is seen as a safe haven bet at times of such uncertainties.

    Moreover, a rise in energy prices and higher US Treasury yields are additional developments that have moved to the fore this week denting risk sentiment even further. Traders are also concerned the Fed will start to withdraw policy support just as global growth slows.

    In this environment, global equities are having a hard time trying to stabilise on Wednesday but the benchmarks are up marginally in mid-day trade. The Dow Jones Industrial Average climbed 0.43% with the S&P 500 up by 0.36% and the Nasdaq that was down an hour ago, starting to recover from the lows and rising by 0.14% at the time of writing. Meanwhile, the dollar index DXY rose for the fourth consecutive day, to 94.358, its highest since Sep last year. It was last up 0.68% at 94.362.

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