The price of gold broke through $1,665 per troy ounce on Thursday afternoon, the lowest level in more than two years. The last time gold was traded at similar values was at the end of April 2020. The reason is the latest data from the American economy, especially Tuesday’s figures on August inflation, which exceeded analysts’ expectations.
Markets are repricing their bets in response to the latest macroeconomic data from the US economy. They now expect the US central bank (Fed) to raise interest rates faster than they had previously calculated. This has an impact on the price of gold, which this year is mainly influenced by reports from the Fed about the continuation of interest rate increases, as well as the strengthening of the dollar in whose prices it is expressed.
And so far, it appears that gold is not working very well as a hedge against inflation this year, as it has lost roughly seven percent since the beginning of the year. The price of gold has fallen nearly four percent since Tuesday alone, when it was trading at $1,731 an ounce ahead of the release of US inflation data.
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Gold, which is supposed to serve as a store of value, is failing at the highest inflation in decades. Not even industrial metals, whose price multiplied overnight in a panic at the end of winter. The panic passed and prices fell again. You could only make money on oil, gas and coal.
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And the pressure on gold is likely to intensify. “The market consensus is counting on an increase in interest rates by 75 basis points at the next Fed meeting. However, there are already voices that the increase could be even higher. If that happens, the price of gold will come under further pressure,” said Jakub Petruška, an analyst at Zlaťáky.cz
“Technically, the gold price is at a crucial crossroads and the bulls have to defend the price of $1,675 to $1,690 per ounce. Its short-term breakout and quick return higher may not yet be dramatic for the market. But a one- to two-week closing below this level could start another strong shorting by speculators,” added Jan Železník, an analyst at Zlaté Rezervy.
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The crown value of gold is increasing
On the one hand, according to Petrushka, the US dollar may continue to strengthen, which causes a nominal drop in commodities whose price is traded in dollars. They lead to the second higher rates to the growth of bond yields, which causes the outflow of part of the capital from gold to bonds.
Although the price of gold in dollar terms has been under pressure since the beginning of the year due to the policy of the US central bank, its value in crowns is increasing. At the beginning of this year, gold traded at the $1,800 mark per ounce, which at the then exchange rate was approximately 38.5 thousand crowns. On Thursday, the price of the yellow metal was around 41.5 thousand crowns. And so while the dollar price of gold has fallen by around seven percent this year, on the contrary, the price for a Czech investor increased by approximately eight percent.
Analyst: Gold and silver fell in price. As well as a barometer of economic sentiment, copper
The price of European gas rose by more than 170 percent from the beginning of the year to the end of August, while Brent North Sea crude rose by almost 30 percent. On the contrary, precious and industrial metals generally fell in price. The prices of the main agricultural commodities rose only slightly. XTB analyst Štěpán Hájek said. According to him, commodity prices on world markets have experienced extreme fluctuations this year.
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