Gold plunges – here’s why it could fall even lower Gold plunges – here’s why it could fall even lower
3 Hours Ago | 03:19
Gold slid about 2 percent Wednesday, hitting a nine-month low, as the surging U.S. dollar continues to exact a heavy toll on the yellow metal.
And at this point, technical analyst Craig Johnson of Piper Jaffray says he wouldn't be surprised to see gold prices fall all the way to $1,000 per troy ounce.
"What's happening is, we had a great relief rally that failed at $1,375,"
In other words, despite the metal's substantial rise from the beginning of the year through July, the "downtrend resistance" has remained intact.
"It looks like we have further downside left to go in gold," said Johnson.
He sees the next layer of support as $1,050 to $1,000, a level that served as support in late 2015, and appeared to act as resistance in 2008 and 2009.
"We would continue to use any relief rallies to be lightening up on gold," he added.
Ironically, while gold is frequently said to serve as a hedge against inflation, it is inflation concerns that now appear to be hurting the metal.
The idea that President-elect Donald Trump's infrastructure plans will spur inflation leads to the secondary thought that the Federal Reserve will raise rates quickly so that inflation does not get out of hand.
And as rates rise, gold tends to get hit, both because rising rates make nonyielding gold look like a worse investment relative to bonds, and because rising rates tend to make the dollar more valuable, meaning that it should take few dollars to buy the same amount of gold.
25 Canada Square, Level 33, office 50, Canary Wharf London, E14 5LQ +44 20 3608 6256
World Financial Markets - 0700 17 600 Varchev Exchange - 0700 115 44
Varchev Finance Ltd is registered in the FCA (FINANCIAL CONDUCT AUTHORITY) with a passport in the United Kingdom: FCA, United Kingdom - registration number: 494 045, which allows provision of financial services in the United Kingdom.
Varchev Finance Ltd strictly comply with the statutes of the European directive MiFID (Markets in Financial Instruments). targeting increased efficiency, transparency and uniformity of financial instruments.
Varchev Finance Ltd is authorized and regulated by the Financial Supervision Commission - Sofia, Bulgaria: License number RG-03-02-05 / 15.03.2006
The information on this site is not intended for distribution or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Disclaimer:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.