The yellow metal has been trading with losses lately. Its recent steep gains have been trimmed, and new victories are not in sight. However, experts of the precious metals market are optimistic about the long-term future of Gold
The precious metal closed September with a 3.4% decline. According to analysts, this is the first significant drop in the value of gold since June this year. Its attempts to gain momentum are unsuccessful, although it does not give up. As of October 1, the XAU/USD pair is trading at $1,752.22, showing a slight upward trend. At the same time, the price of the COMEX gold futures for December delivery traded on the New York Stock Exchange fell by 0.25% to $1,725.75 per troy ounce.
Experts consider the stronger US currency to be an obstacle to an increase in the precious metal. The greenback has grown steadily over the past several trading sessions, thus taking the lead. This hindered the growth of gold, in which investors preferred to invest in the third quarter of 2021. Notably, during that period, market participants expressed concerns about the spread of the new Delta COVID-19 variant. Against this background, the demand for defensive assets increased sharply, primarily for the yellow metal. However, at the end of the summer, the dynamics of the asset became sluggish. In July, gold added 2.3%. In August, the precious metal rose by 0.3%. In September, it dropped by 3.4%. According to analysts, the September decline was the first since the beginning of this summer. As a result, gold lost 0.8% in the third quarter of 2021. Since the beginning of this year, it has fallen by more than 7.8%.
The key factor determining the dynamics of the precious metal in September is still the US dollar's rate. In early autumn, the greenback was trading under pressure from expectations of further changes in the Fed's monetary policy. Earlier, Federal Reserve Chairman Jerome Powell announced that the regulator would probably phase out its stimulus programs, while some of his comments were hawkish in nature. The fact that the Fed was close to tapering its support measures supported the US dollar, experts emphasize.
The current high rate of the US currency lowered the demand for the precious metal among investors. At the same time, the situation in the precious metals market sometimes changed dramatically. Earlier, the yellow metal showed an inverse correlation with the greenback. However, in the current year and in late 2020, there were times when the dynamics of these assets were synchronized. Lately, experts have recorded an inverse correlation when the stronger greenback exerted pressure on gold.
The short-term outlook for the precious metal is rather pessimistic. Analysts believe that gold has lost its directional vector, so the US dollar is in the focus of market participants. According to Michael Langford, executive director at corporate advisory and consultancy firm AirGuide, greenback is now the best defense against most risks, unlike gold. In the medium term, the precious metal may gain momentum amid weak US macroeconomic statistics or the debt problems of China's Evergrande. As for the long term, these factors will hardly support gold.
According to DailyFX currency strategist Ilya Spivak, only the long-term outlook for the price of the yellow metal is optimistic. The recent simultaneous drop in gold and stocks indicates that the precious metal cannot save from losses in risky assets, Spivak believes. Analysts note that the foreseeable future of gold is rather dull, since the odds of gaining strong bullish momentum are pretty slim.
