With markets turning risk-off in the later half of the New York session with the Dow printing new lows and down 1% as of the time of writing, gold is under renewed pressure and setting new weekly lows inside the bearish cycle. As a result, the DXY index shows the US dollar strengthening. Gold is currently trading at $1,725.00, down 0.5%, while the DXY is almost unchanged at 108.15 for the day.
There are two important pieces of US inflation data due out this week that might weigh on the US stock market as earnings season approaches. This will have a negative impact on the company’s earnings, and as long as people are afraid of a recession, the dollar will be supported and gold will be under pressure.
Wednesday’s Consumer Price Index data is likely to show the greatest year-over-year increase since 1981, at 8.8%. Gold prices have plummeted as a result of investors’ heightened expectations. According to analysts at TD Securities, the highest withdrawals from broad commodities funds since the Covid-19 crisis spurred a cascade of selling, including from CTA funds.
Indeed, considering the still enormously inflated length existing in gold markets from proprietary traders, the next data might be particularly problematic for gold prices. In light of the Fed’s hawkish stance and the large size of this cohort during the pandemic, we have already expressed concern. There is a liquidation vacuum, and these positions are fragile, which shows that the yellow metal is still vulnerable”