Gold price remained under pressure on Monday as investors reflected on the rising crude prices and the upcoming Federal Reserve interest rate decision. It also slipped to $4,330, down by 7.76% from its highest point this month as US bond yields remains at an elevated level.
Gold price falls as crude oil costs raise inflation concerns
Gold dropped substantially on Monday as energy prices continued rising. Brent, the global benchmark, jumped to $108, up sharply from the July low of $70. West Texas Intermediate (WTI) rose to $103 and is hovering near its highest level since May 20th.
Crude oil prices have continued rising because of the ongoing crisis between the United States and Iran. The two sides launched strikes last week, with Iran continuing to target oil tankers attempting to cross the Strait of Hormuz.
At the same time, Iran-backed groups in Yemen and Iraq have entered the field. Iraqi groups targeted Saudi Arabia’s East-West pipeline, forcing Saudi Arabia to close it, a notable thing since it moves over 7 million barrels of oil per day. Houthis, formerly known as Ansar Allah, have taken a large part of Yemen.
Soaring oil prices have an impact on gold. That’s because they mean that US inflation will remain at an elevated level. Data released last Friday showed that the headline and core inflation remained above the Fed’s target of 2.0%. This means that the Federal Reserve will decide to hike interest rates in the coming meeting on Wednesday.
Rising US bond yields
Gold price also retreated as US bond yields continued rising. The ten-year yield jumped to 4.98% and is attempting to cross the important milestone of 5%. Similarly, the 30-year yield rose to 5.367%.
Other global bond yields, including in countries like Canada, Germany, France, and the UK have also surged in the past few months. The rising yields is a risky move for gold because it does not generate an income.
Global bond yields are rising because of the rising public debt. Data shows that US public debt surged to over $40 trillion and is continuing the uptrend. Also, government bonds are reacting to the ongoing AI boom that has seen top companies like Microsoft and Google raise billions of dollars.
Gold price technical analysis
Gold price chart | Source: TradingView
The daily chart shows that gold has slumped in the past few days. It has slumped from a high of $4,694 on August 25 when it formed a doji candlestick pattern.
Gold has already moved below the 50-day Exponential Moving Average (EMA) and the Major S/R pivot point of the Murrey Math Lines tool. The Relative Strength Index (RSI) and the MACD have continued falling.
Therefore, gold price may continue falling in the near term as sellers target the ultimate support level of $4,062. This view will be confirmed if it drops below the crucial support level of $4,283.
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