Gold has been on an uptrend since the year started. However, the prices of the precious metal shook many investors this week as gold fell from its record high of $2,075 to about $1,863 per ounce. That massive sell-off in the gold price has made a majority of the investors to reconsider their stance towards gold.
The price is now on track to record its first weekly loss since June and investors are asking themselves; do they need to worry about this downtrend?
Is Gold Going Up Or Down?
On August 14, gold is trading at around $1,935 and having made an all-time high of $2,075 on August 7th. On August 12, the price recorded a low of $1,863 and since then, the price of the precious metal has been unable to rise back again above the critical level of $2,000. This week, the market has seen the most significant sell-off for the gold price since 2013.
Now, it is almost guaranteed that gold will record its first weekly drop since June 2020, as shown in data charts. Analysts and commentators say that the precious metal should surge above the $2,000 price level and remain above the critical zone for the bull rally to continue.
Are Gold Traders Nervous?
The recent sell-off in the gold price has got many gold enthusiasts rethinking their investment strategies. The cumulative total known gold ETF holding is currently at a record high, but there is a minor indication of some retracement. This could be an initial sign of an easing in upward momentum.
Nonetheless, it may be too soon to set this as the developing trend. More data is necessary to confirm that the traders are not backing gold to the same extent that they were before. There is some degree of nervousness among the gold traders.
What Is The General Economy Showing?
The United States economy has shown some recovery in the labor markets since fewer Americans are filing for Initial and Continuing Jobless Claims. Nonetheless, this improvement in the United States labor market is not adequate to shift the Federal Reserve’s narrative on their low-interest rate monetary policy which is the main driver for the gold price.
Irrespective of the US stock market’s strength, the conversation of the United States interest rate is not likely to change any time soon. That means the gold price is expected to move higher.
What Does Goldman Sachs Have To Say About Gold Price?
The Global Head of Commodities Research at Goldman Sachs Group, Jeff Currie, said that his firm closed to buy recommendations for Silver. Nevertheless, they are still keeping the buy recommendation open for gold. He was speaking during his interview on Bloomberg on August 13.
Goldman Sachs thinks in the same argument just as mentioned before that the interest rates in the US are not likely to change any time soon. It is crucial to say that when the sell-off started for the gold price back in 2012, it did not happen due to the interest rates moving up. It mainly started as a result of a dovish monetary policy coming to an end.
The Federal Reserve started tapering its asset purchase program and that took the shine away from the precious metal. The hike in the interest rate came in at a later stage.
The Federal Reserve does not seem like it will ease off the gas pedal any time soon. However, some more positive headlines for the US economy may get the Fed thinking that it is time for them to scale back on their asset purchase program, and that may significantly influence the gold price extensively.