Commodity markets continue to attract a great deal of directional inspiration from the price action across financial markets with traders and investors trying to gauge the risk and potential depth of an economic slowdown by watching developments in stocks, bonds and forex. A focus which during the past two week sent precious metals on major rollercoaster ride.
Gold’s ability to act as a diversifier has increasingly been called into question in recent months with the metal falling despite seeing inflation at the highest level in four decades. Once again, however, it is important to note that gold as an integrated part of financial markets will continue to be impacted by movements and correlations to other markets, especially yields and the dollar. Gold trades down by 9% in a year.
Gold in a downtrend since March has settled into a wide $1617 to $1725 range, with support being of the 2018 to 2022 rally. While maintain a bullish long-term outlook for gold, a break lower may raise concerns about a double top sending prices even lower. For a change towards a more bullish sentiment to occur the metal first needs to break the downtrend followed by a move above $1735.