Gold price dropped on Wednesday, pressured for a second day below the psychological $2,000 mark in the face of a firm US dollar and US Treasury yields.
The US Dollar has been in favor with favorable US data and while the debt-ceiling negotiations continue in Washington. The threat of potential defaults has been pushing up treasury yields while the outlook is mixed for the greenback.
However, there was some improvement in the optimism over the possibility of agreement on the US debt ceiling while US President Joe Biden expressed confidence an agreement will be reached. House Representative Speaker Kevin McCarthy argued that a debt-ceiling agreement by Sunday is doable. Meanwhile, US Vice President Kamala Harris is to brief on preventing a default on Thursday.
The US Dollar index was last seen up 0.27% to 102.87, making gold more expensive for international buyers while the US two-year note was last seen paying 4.165%. The 10-year note printed a high of 3.57%.
Analysts at TD Securities have said that ´´the gold price may well be near all-time highs, but the positioning set-up is inconsistent with a cycle top.´´
´´The bar for algorithmic liquidations in gold is high, whereas Shanghai trader length is also nearing year-to-date lows,´´ the analysts added.
´´Dry-powder analysis also highlights that position sizing for gold bulls remains near average levels, and our gauge of discretionary trader positioning continues to suggest that this cohort has yet to participate in the precious metals rally.´´
Lastly, the analysts said, ´´looking forward, we expect a hoard of discretionary capital to flow towards gold, given strong historical linkages with market expectations for a deepening Fed cutting cycle over the next year. In turn, we expect gold to print new cycle highs over the coming months.´´
Gold daily chart
Gold price is pressured on the front side of the bearish trend on the daily charts and is headed toward both horizontal and dynamic support areas.
Gold H4 chart
From a 4-hour perspective, the price could continue lower to support or it may well correct a little before the next decisive move lower.
