Gold (XAUUSD) Is Ready For A Price Dump

The gold price is in trouble after breaking the $1,700 level.

We warned this blog about the weak bounce at the $1,700 mark. The next major support in gold is at $1,400.

Daily XAUUSD Chart

Gold is suffering from the strength of the US dollar. Investors are looking for high-yielding assets as the world’s most important central bank makes aggressive rate hike moves.

The gold price has been a key index because the $1,700 level provided support. When a market completes a price dump under a key level, then there is only fresh air below.

Markets are being pummelling this week by a blizzard of rate hikes by central banks. The Swedish Riksbank started the show with a surprise rate hike this week. That was coupled with a right-wing win in the election.

There was also data from the US Labour Department on Tuesday that said that the consumer price index rose 0.1% in August. The market has been recovering after remaining below change in July. Economists had expected consumer prices to fall 0.1%. On a year-on-year basis, consumer prices rose 8.3% in August. That was higher than the estimates of analysts.

According to Dennis Kisner of Bok Financial:

Macro-economic pressures from the Federal Reserve set to raise interest rates this week have added pressure back on the US stock market, which seems to be capping crude prices,” said Dennis Kissler, senior vice president at Bok Financial Securities. “Near term, prices are vulnerable to the Fed’s rate rises and more Strategic Petroleum Reserve releases scheduled through November.”

Ahead of a swathe of central bank decisions throughout the week, Sweden’s Riksbank took an aggressive approach to inflation as they hiked more than expected by 100bps, taking their interest rate to 1.75%.

The decision sparked fears of the Fed and others replicating it. Risk aversion abruptly entered the market as US futures started selling off to re-price in a higher rate hike by the Fed. The US dollar index bolstered the EUR back to parity.

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