Gold has been hit by the strength of the greenback
The dollar continues to recover some of the ground it lost to the euro after the Fed announced a new, more flexible, stance towards inflation. Although the greenback’s medium to long term forecast remains skewed to the downside, investors are repositioning themselves in relation to the single currency. This follows comments from the ECB’s chief economist warning of the potentially detrimental effect that a strong euro may have over the zone’s economies. As a result, investors were left with the impression that the European central bank will, if necessary, move to prevent its currency from going through the long term $1.21 resistance.
Ricardo Evangelista – Senior Analyst, ActivTrades
Gold has been hit by the strength of the greenback in the last 48 hours. The bullion price retraced from the resistance zone at $2,000 to once again near the support zone at $1,920. Moreover, the general “risk on” scenario seen on markets, with another rally on stocks, pushed investors to bet on more risky assets, at least in the short term.
Despite this, the main trend has not changed, with the price in the main lateral channel between $1,860 (the low of 12th August) and $2,075 (the high of 7th August). The fundamental outlook is still positive for bullion, in a scenario where central banks’ dovish policies will continue for a long time.
Carlo Alberto De Casa – Chief analyst, ActivTrades
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