Why Yellow Metal Prices are Plummeting
Gold prices have been steadily declining after failing to surpass the resistance zone at $1,650. The current price is at its lowest point in seven months. Strong economic data from the US has triggered a meltdown in the gold market.
The US dollar has reached new ten-month highs. Core PCE prices, which is the Fed’s key measure of core inflation, rose by 0.1 percent month-over-month in August 2023, the lowest increase since November 2020.
Despite this, the 10-year treasury yield has reached its highest point in 16 years. This is because real interest rates are still on the rise, which supports the narratives that the Federal Reserve will keep interest rates higher for longer.
The US economy seems to show resilience as GDP growth, published last Thursday, remains constant for the second quarter. Furthermore, in September 2023, the ISM Manufacturing PMI rose to 49, marking the highest reading of the year thus far.
The yellow metal faced additional pressure as US lawmakers reached a temporary agreement over the last weekend to fund the government for an additional 45 days. Investors are currently awaiting the release of the monthly Non-Farm Payroll data scheduled for Friday.
On the daily charts, a descending triangle pattern seems to have emerged. Gold prices have successively peaked lower, with each peak being lower than the one preceding it. The psychological support zone of $1,900 was broken on Wednesday with a significant momentum, just before the release of GDP and inflation data.
The 50% Fibonacci level of the recent wave was unable to hold as well, due to a sustained selling pressure. It is yet to be seen if the bulls can defend the next psychological support level at $1,800.