Is gold’s bearish trend reaching its end?
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Gold has entered this month with a bang, registering monumental gains amid a weakening Dollar. The bullion’s price now stands above the $1,750 level after a dizzying rally from the $1,616 zone.
Gold’s spot price started last week at nearly $1,670 an ounce but exited it at around the $1,765 zone, recording its best performance since the week ending July 24, 2020.
A gloomy year for gold under the backdrop of a strong Dollar and rate hikes
Gold had been under strong bearish pressure where it lost more than $400 (or 20%) in value till October’s end, since reaching the peak of over $2,060 in March.
Gold prices skyrocketed earlier this year as fears about the repercussions of Russia’s invasion of Ukraine elevated. However, the euphoric bubble soon popped as the Fed began its series of aggressive interest rate hikes to bring down soaring inflation. The US Treasury yields mounted, and investors turned towards government bonds instead of investing in gold, to acquire much better returns.
Moreover, the DXY (Dollar Index) surged to record highs where the US Dollar gained more than 10% against a basket of major currencies so far this year.
These developments have not only been weighing down the global equity market, but also gold prices over the past several months. During this tumultuous period, many traders approached gold CFDs to capitalize on declining gold prices. easyMarkets is one of the most prominent platforms where you can trade the XAU/USD pair with reliable spreads.
Gold shows signs of recovery as inflation heat eases
Since the start of November, gold has surged more than 10%, wiping off the declines of the previous three months. The yellow metal has exhibited a remarkable recovery from its $1,616 bottom within a few days, as it now eyes the big $1,800 figure.
The sharp rebound in gold prices is mainly attributable to the weakening Dollar wave that was initiated with the release of the US Jobs Report, as well as easing inflation indications. After the better-than-expected US retail sales figures released on 16 November, the Dollar gained, and gold retreated to the $1,755 level from which it has been unable to break out.
What’s in store for gold in the coming months?
Optimism is building up among gold investors in the face of lower-than-anticipated CPI data and US unemployment figures. Many analysts are predicting that the Fed might tone down its aggressive approach now and lessen the pace of interest rate hikes in the December meeting, which could be a positive impetus for gold prices.
However, some experts are also suggesting a flipped scenario where better-than-expected economic data could force the Federal Reserve to maintain its aggressive approach to sustain these constructive results. This stance would impede gold prices from surging to the levels of their past glory.
Jason Morgan is an experienced forex analyst and writer with a deep understanding of the financial markets. With over 15+ years of industry experience, he has honed his skills in analyzing and forecasting currency movements, providing valuable insights to traders and investors.
Forex Content Writer | Market Analyst
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