Gold Weaker on Yellen Comments
Today’s Spotlight Market
Gold is off to a softer start to the week after Friday?s comments from Fed Chair Janet Yellen. Yellen had a decidedly more hawkish tone to her comments than she had in recent public appearances, emphasizing that inflation risk is picking up and that the central bank may have to raise rates sooner rather than later. The comments added further reinforcement for the US Dollar Index, which has been in recovery mode of late. The combination of a stronger Dollar and strong outside markets, like Crude Oil, have left the Gold market vulnerable of late.
Fundamentals
The US Dollar Index has continued its strong month of May after appearing to be on the verge of a technical collapse. The index has climbed back above some important near-term technical levels, which suggests that prices may continue to press on. Janet Yellen?s comments follow up FOMC minutes which moved away from the dovish tone of previous meetings. It certainly appears that the central bank is keen to raise interest rates at the earliest opportunity it sees fit. Traders will be paying close attention to key economic queues in the coming weeks to get a feel for the July meeting, starting with the employment and non-farm payroll data this week. The likelihood of a Fed rate hike in July is 50-50. A strong showing could tip the scales toward a rate hike in July. Physical demand for Gold has been poorer than previously expected, which has left Asian Gold dealers and jewelers with large inventories. Buyers had been reluctant to purchase metal when prices were rallying and have abstained from value buying to this point. This likely indicates that buyers could remain on the sidelines until prices fall further. Two-thirds of India’s Gold demand comes from rural areas, where jewelry is a traditional store of wealth. This is also planting time, so farmers may be holding off from purchasing Gold in favor of seeds and fertilizer.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the August Gold contract continuing to follow-up on the small double top formation. Prices closed below near-term support around the 1218 level. Prices are closing in on the 1200 level, which can be seen as technical and psychological support level.
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