Fear is supposed to be supportive for Gold, right?
Well, not when there is a panic for dollars like yesterday.
Assumptions are that Q3 2021 was the right time to put the pandemic behind us, and open economies fully, most developed economies now have high rates of vaccination. However, Covid variants are causing concern, particularly the highly contagious delta strain.
Could delta force Governments to lockdown again?
The market is asking this question and responding by buying US Dollars in response across the board.
The dollar buying is being aided and abetted by some Federal Reserve speakers, talking up tapering and higher US Interest rates. But they are not talking about changing policy tomorrow, but some unspecified time in the future.
It’s probable that tapering will start early in 2022. It will take months to complete. Once tapering is over, the discussion to put interest rates up by 0.25% begins.
I think the earliest that US interest rate rise is late 2022. The outlook for higher interest rates is hardly a frightening one for any risk assets.
So why the big panicky moves? Because you have to take into account this weeks unknown, NFP Friday. No doubt, the market will be nervous about buying Gold ahead of a possible strong NFP. This nervousness is keeping the pressure on the downside.
Today we are seeing some resistance in early Asian trade at 1765/1766 so far this has area prevented further gains back above 1770/1772 more resistance is found at 1778.
While 1766 continues to cap the upside it is likely that the downside will be tested with support found below 1760 at 1756/54 and then 1752/1750.
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