Khaleej Times - Time to Buy? Gold Prices Hit Over 4-Month Low

Vijay Valecha, Special to Khaleej Times August 10, 2021

Gold prices fell over four per cent on Monday to more than a four-month low due to strong US labour data, but the precious metal made some recovery later in the day.

The metal recovered from a flash crash that saw prices dropping $70 in minutes on concerns that the Federal Reserve may soon start paring back its massive monetary stimulus.

The precious metal was trading at $1,7435.55 an ounce, up by 1.47 per cent at 4.45 pm UAE time. In Dubai, 24K was trading at Dh211.5 per gram on Monday afternoon.

Vijay Valecha, chief investment officer at Century Financial, said amid holiday-thinned market conditions, Asian traders responded to solid US jobs data, which fuelled concerns of a sooner-than-expected Fed’s tightening and exaggerated the sell-off in the gold price.

“Rising Chinese inflation coupled with the renewed growth concerns in the world’s second-largest economy aided the swift retracement in the bullion. Besides, progress on the $1 trillion infrastructure bill also offered some support to the bright metal. Nonetheless, the gains in the Treasury yields would likely cap its rebound going forward,” he said.

Technically, according to Valecha, weakness back below the $1,730 level will reaffirm the negative outlook and accelerate the fall towards the $1,700 level followed by $1,680 region.

On the upside, if the metal breaks above $1,760 its will likely encounter strong resistance near $1,790-$1,800 region, he said, adding that in UAE, 24K gold price will likely slide below Dh210 in the days ahead with the next strong support seen near Dh203. On the upside, strong resistance is seen near Dh218.

Ipek Ozkardeskaya, a senior analyst at Swissquote, said the prospect of higher Treasury yields is becoming a serious headache for gold.

“The speed at which investors dumped their gold holdings after the non-farm payroll was rather impressive. We should see a short-term support forming near the $1,680-$1,700, with those investors who would still benefit from the latest slump to enter a long position in gold as a hedge for inflation,” said Ozkardeskaya.

Naeem Aslam, chief market analyst at AVA Trade, said looking at the price action on the daily time frame, there is no doubt that it is oversold, and a strong rebound is surely on the cards.

“For gold investors, the most important reading will be released on Wednesday, the US CPI number. It is likely to bring higher volatility for the gold price again,” he said.

Source:
Khaleej Times