(Kitco News) – After a strong start, the gold market prepares to end the week with a groan as the new life of the US dollar keeps the precious metal near critical support.
December gold futures last traded at $ 1,924.30 an ounce, down 1% on the day. According to some analysts, it will be important for gold to maintain support around $ 1,920.
“Many stop-loss orders are likely to be placed below, so it will be important to maintain this support zone. Otherwise, the correction could last much longer, ”analysts at Commerzbank said.
Renewed weakness in gold also comes as weak economic data weighs on the euro, pushing the US dollar higher.
The greenback is also attracting some bargain hunters after falling to two years earlier in the week. The IHS Markit Flash Composite Purchasing Managers Index for the euro area fell to 51.6 from the final reading of 54.9 in July. The figures for August were worse than expected.
Following Eurozone PMI data, IHS will release its preliminary report for the United States at 9:45 a.m. Eastern Time.
Some currency analysts say the greenback is also attracting some bargain hunters, as the US dollar index fell to a new two-year low earlier in the week. The index last traded at 93.26, up 0.63% on the day.Although the gold market expects to experience its second week of losses, sentiment remains fairly positive. Many analysts view the current price action as a period of healthy consolidation. Some analysts are not ruling out lower prices, with some even seeing the possibility that prices may test support around $ 1,800 per ounce.
“Regardless of recent losses, fundamentals remain in favor of rising gold prices with a potentially rebound on the cards,” said Lukman, senior research analyst at FXTM. “A significantly weaker dollar, negative US yields, pre-election nervousness and an increase in coronavirus cases in the US should make gold shine in the medium to long term.”
George Gero, managing director of RBC Wealth Management, said that although gold struggled to catch a bid on Friday, options in the futures market rose, indicating that investors continue to actively hedge their bets. .
He added that he continues to expect gold investors to continue buying if there is a dip.
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