Gold has breached the psychological $2,000 level and has an underlying positive momentum. The precious metal was up over 7% in March with its all-time high of 2,074 now in sight. It's appreciated over 25% since its November 2021 low.
There are several elements which are influencing gold.
As suggested in yesterday's article it has an inverse correlation with the dollar. This means that as the greenback declines, gold moves higher i.e., a troy ounce of gold is worth more as the dollar falls.
Another factor at play are lower yields. Typically bonds and gold compete for safe-haven status. However, as yields decline so does the opportunity cost of holding gold over bonds. That is gold becomes more attractive to investors.
The SVB collapse and the ensuing crisis of confidence in the banking sector has seen the 2-year yield decline. Data has also come in weaker and concerns about recession have grown.
Monday saw a weaker than expected ISM Manufacturing PMI, yesterday factory orders missed forecast and the JOLTS series came in lower than 10m for the first time since July 2021.
In effect, the market is anticipating an end to the current hiking cycle and the precious metal is benefitting.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.