International spot gold fell slightly on Monday, hitting as low as $1727.10 an ounce, while US bond yields retreated moderately, but the lira plunge provided some support for the dollar, limiting gold's rebound.
The dismissal of Turkey's central bank governor by Turkish President Recep Tayyip Erdogan (Recep Tayyip Erdogan)-the third Turkish central bank governor to be fired in two years-has caused an uproar in the investment community, causing the lira to fall sharply. As the collapse of the lira triggered an influx of money into the dollar as a safe haven, the dollar rushed above 92 today. The dollar hit an one-week high on Friday after the Fed allowed exemptions from capital requirements introduced in response to the epidemic to expire, causing yields to rebound higher. In recent weeks, the dollar has risen as Treasury yields have risen.
Although for now, the dollar index is still trying to break above 92, the momentum of the dollar seems to have been reversed as bears have surrendered. Khoon Goh of ANZ (ANZ) points out that the question now is "the extent to which hedge funds are willing to invest in long dollars" and how much asset risk will be affected if the dollar soars from now on.
But geopolitical risks still provide some support for gold. Shortly after the conclusion of talks between senior Chinese and US officials last week, the United States on Monday announced sanctions against two other Chinese officials related to human rights issues in China's Xinjiang region. Britain, along with the European Union, has imposed sanctions on four Chinese officials and one Chinese institution involved in human rights violations in Xinjiang.
Earlier, the EU announced sanctions against Chinese officials on the morning of the same day, triggering fierce retaliation from Beijing. China immediately announced a tit-for-tat asset freeze on 10 EU people, including European politicians, the (Political and Security Committee), the EU's main foreign policy decision-making body, and two leading think tanks.
Overall, the political situation remains tense, especially as a series of actions since Biden took office have led to speculation about possible changes in Sino-US relations in the future, which could trigger some safe-haven buying of gold.
On the other hand, gold prices have been hit hard by rising bond yields and outflows from gold ETF funds over the past period, but recent demand for physical gold in many countries has stopped the decline in gold prices. After nearly a year of depression, concern about the epidemic in many Asian countries has gradually eased in the past two months, while the price of gold is at a multi-month low, which has boosted demand for gold in many Asian countries. So as to provide some support to the gold price through the physical gold market.
Technically, so far, gold has successfully defended the support of the short-term upward trend line. However, there is a lack of strong follow-up buying above the $1740-$42 range, so caution is needed before setting positions for further appreciation. In addition, after the Fed meeting, the upward trend of gold prices suffered a setback before horizontal support turned to resistance of $1760-65, which was not conducive to the rebound of gold prices.
If it continues to fall below the above trendline support, which is currently close to $1728, it will reaffirm the negative bias and pave the way for further softening. At that time, gold is likely to become fragile, falling below the intermediate support level of $1720 will accelerate to the $1700 mark.
Future outlook:
Bob Haberkorn, senior market strategist at RJO Futures, said: "Powell's comments on interest rates are very supportive of gold, but on the other hand, the fact that 10-year yields continue to rise limits any upside for gold."
David Russell, marketing director of GoldCore, said the Federal Reserve said last Wednesday that ultra-loose monetary policy would continue until 2023, a statement that supported gold strongly.
