Gold’s collapse continues

The possibility of US rate rises continues to weigh on gold sentiment.

Last week’s comments from Janet Yellen are still hanging over the markets and nowhere is this more obvious than with the gold price. The Federal Reserve’s comments last week inferred that US interest rates could rise in six months’ time. Considering how many years they have been held at these low levels for, the comments caught traders off guard.

The general consesus was that the Federal Open Market Committee would want to end its current debt-purchasing scheme before increasing the interest rate. This timeline is either very ambitious or infers an overlap between the two events happening.

Gold does not generate an income; only a capital gain. It has always been susceptible to interest rate moves and the knock-on effect this has with holding competing asset classes. The underlying demand for physical gold has been subdued in the last four weeks. This has also aided the move lower in the precious metal as both investors and jewellers have eased back on purchases.

Today has seen gold dip below the 50-day moving average, and any close below the $1308 level could be taken as a signal that lower lows for March will be set. 

Spot gold chart

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.