The price of Gold has fallen for the forth day to an overnight low of $1249 in overnight trading. It now sits at it’s lowest level in four months.
An improving US economic outlook based on better than expected figures. The latest non-Farm payrolls data could cement this outlook and signal further falls for the precious metal.
So could the price rally? The twin fears of slowing growth in China and an overheating US economy have not gone. Many analysts forecast risks ahead although these fears have somewhat declined on current economic figures emerging form the US.
Gold is sensitive to US interest rates and recent comments from US Federal Bank chairman Janet Yellen at Jackson Hole will not have helped it’s case. The Central Back has indicated that the case for a rate rise was strengthening. This has result in most analysts forecasting a rate rise before the end of the year.
An improving economic outlook has added to this expectation. Markets certainly look to be positioning themselves for a rise sooner rather than later. However it is not inconceivable that policy makers may delay a rate rise until after the US presidential election.
From a technical perspective the price has now broken both the 200 day and 100 day moving averages on the chart. This is seen as bearish and could signal further falls. Traders risk can be defined and limited at these levels. Following the recent falls, RSI is in oversold territory. Any surprise to the downside in the latest jobs numbers could see a sharp relief rally.
Gold is often used as a store of wealth. Its price is influenced by demand from investors who are looking for a safe haven for their investments. In the face of global headwinds demand for the commodity sends the price higher as equities and bonds are liquidated to purchase the metal.
In addition to investment it is also a commodity and luxury item. Used throughout the globe, China and India are the largest physical buyers.