Gold Price Outlook Support Looks Brittle as Rates Remain Elevated

As the world’s economy continues to struggle, many investors have backed out of gold. However, experts say the yellow metal will remain a desirable investment. While gold’s performance tends to correlate with the economic health of a country, it also has its ups and downs. Traders must be aware of these fluctuations and develop technical analysis charts to gauge gold’s future performance.

The recent sell-off in gold prices is likely to continue as the King dollar remains strong and Treasury yields fail to offer any support to buyers. The path of least resistance for XAU/USD looks to be down ahead of tomorrow’s release of the Fed minutes.

Historically, gold has done well during periods of high inflation. In years with high inflation, its price has risen by an average of 14%. In times when inflation was largely driven by commodities, gold’s price rose by 25 percent. Generally speaking, gold outperforms other commodities in higher inflationary periods, but lags behind them over the subsequent 12 to 18 months.

Gold prices have steadily declined since their high in March 2022. This is primarily due to the monetary tightening efforts of central banks. Analysts predict that the U.S. central bank will raise rates until at least the first quarter of 2023. In addition, investors have become more protective of their portfolios after the Russian invasion of Ukraine.

Gold has long been an attractive investment for investors. Its shiny yellow color has made it an attractive asset for centuries. It is also a safe hedge against inflation. Many people choose to keep gold in their family as a means to preserve their wealth.

In terms of US-dollar terms, the appreciation of the US dollar has acted as a headwind for the gold price. This trend, however, has been beneficial to gold prices in many other currencies. The price of gold has increased significantly in the last few decades, reaching more than $2,000 per oz.

Gold has recovered from a trough in 2021, with the price of spot gold trading over $1,800/oz. However, the short-term outlook remains weak. The support level may be retested soon, so investors should be aware of the risks. Additionally, currency traders must be aware that trading with leverage carries a high degree of risk and is not suitable for all investors.

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