GOLD
is seeking to establish support at the psychological $1,700/oz level, the lowest price since August 2021. It is the fifth consecutive week that bullion has been in the negative, with prices now 17% down from their February highs.
The latest slump in the yellow metal was exacerbated by market repricing on Federal Reserve interest rate rises, as the U.S. inflation rate (
USIRYY
) surged to 9.1% year-over-year in June, its highest level in 41 years. This boosted the US dollar (
DXY
), which is now hovering parity against the euro (
EURUSD
), and put pressure on the short end of the US yield curve, with the 2-year yield jumping to 3.15%. Bearish pressure has given way to opportunistic buys on the recent slide to $1,700/oz. Looking at the 14-day RSI,
GOLD
has consistently been in oversold area for the last two weeks. The 14-day RSI touched 23 today, the lowest level in approximately four years (August 2018), when gold prices plunged to $1,161/oz. From that point onward,
GOLD
began a two-year rally that led to a 77% cumulative gain. We'll see if there's a trend reversal this time, but such severe oversold levels may attract some revenge-seeking bulls. Idea written by Piero Cingari, forex and commodities analyst at Capital.com