Gold suffered another losing week, falling 2.9% in its worst weekly performance since May 2017, as the geopolitical pressures produced by the financial crisis in Turkey kicked off last week. Some traders were caught off guard when the geopolitical issues caused a safe haven play for the U.S. dollar rather than gold.
That move was a double whammy for gold as
it failed to benefit from safe haven demand, being also put under pressure by
gains from its nemesis – the U.S. dollar.
After briefly tapping a 15-month high the
U.S. dollar did soften somewhat on Friday, but gold’s reaction was quite muted,
and over the weekend physical gold prices in Asia have been trending lower.
Gold has held above the supportive $1,178
level, which is positive for now, but if the U.S. dollar resumes its
bullishness in the coming week we could see that level broken.
On the other hand, the relative strength
index for gold is at its lowest level since July 2013, highlighting the
extremely oversold nature of this market at the moment. That could give gold an
upward boost, but only if the U.S. dollar softens and takes some pressure off
gold.
In a far more bearish scenario it’s
possible gold could turn sideways for several weeks, which would remove the
oversold pressure, and leave the way clear for gold to drop to the December
2016 lows.
Sources: FXstreet.com, Kitco.com
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