Date- September 5, 2023
Place- New Delhi, India
In a week marked by cautious optimism and fluctuating market sentiment, the gold price has maintained its range, oscillating around the $1,940 mark. This stability comes despite the headwinds posed by elevated Treasury yields, with real yields strengthening significantly.
Real Yields on the Rise
US real yields have been on a steady ascent throughout 2023, recently reaching a 14-year peak at the 10-year mark, surpassing 1.90%. Real yields represent nominal yields minus the market-priced inflation rate derived from Treasury inflation-protected securities (TIPS) of the same tenor. Such high real yields were last witnessed in 2009 when spot gold traded below $1,000. In 2018, with real yields near 1.0%, spot gold remained below $1,300 an ounce.
BRICS Nations and Gold Hoarding
While real yields have been climbing, geopolitical factors are now driving intrigue in the precious metal. The BRICS nations, comprising Brazil, Russia, India, and China, have been making moves that suggest a renewed interest in gold. These countries are exploring alternatives to the US Dollar as a reserve currency, and there’s talk of potentially establishing a gold-backed currency for international trade, reminiscent of the Bretton Woods gold exchange.
Reports from Western Australia, one of the world’s largest gold-producing regions, indicate that a significant portion of newly mined gold is being shipped to China. Similar actions by other BRICS members, including Russia and Australia, hint at the possibility of gold hoarding becoming a feature of recent price action.
Gold Price Outlook
Looking ahead, the gold market remains in a state of equilibrium, with a trading range between $1,885 and $1,900. The pivotal point for the next significant move in XAU/USD is a break beyond this range.
The gold price is currently navigating between two crucial daily moving averages: the 100-Daily Moving Average (DMA) at $1,953 and the 50 DMA at $1,932. While the 14-day Relative Strength Index (RSI) suggests upside potential, a recent Bear Cross formation, where the 21 DMA closed below the 200 DMA, implies that any upward momentum may be short-lived.
To resume its upward trajectory, gold needs to convincingly breach the 100 DMA at $1,953, aiming for static resistance at $1,970 and potentially reaching the July 27 high of $1,982. On the downside, the initial support lies at the 50 DMA level of $1,932, below which a decline toward $1,916 is possible, where the 21 and 200 DMA converge.
As global economic dynamics and the BRIC nations’ actions continue to evolve, the gold market remains poised for potential shifts. Investors will closely monitor risk trends and any further developments from these key players that could impact the gold price in the days to come.