Gold prices finally cracked as it broke through the strong support region around 1220 and fell through and continues to trade weakly as of this writing. We have been talking about the weakness in the gold prices for long and we had also mentioned about how crucial the gold support around 1220 would be and now that the prices have broken through that, we can believe that the bears are here for the long haul and the bulls would struggle to make any kind of a dent in their presence. The trigger for the break through the 1220 region came about due to the stronger NFP employment report though the seeds for the breakdown in the gold prices were sown much earlier. We had been pointing out for some time now on how the gold prices seem to be struggling irrespective of whether the dollar was strong or not and this was based on the notion that the gold was a low yielding asset.
Gold Looking Much Lower
So when the interest rates, the bonds and the yields begin to pick up all around the world, it was only a matter of time before investors start feeling the pinch and shift to the higher yielding assets like the currencies and the bonds. This is what we are seeing in the gold prices for now and this is set to continue in the short and medium term. The improving strength of the dollar is useful for the bears to maintain their dominance and next, they should be looking at 1200 and below as their short term target. We believe that the data from the US is only going to get even better and this is likely to keep the gold prices under pressure.
Oil prices have turned weaker over the last few days on account of supply concerns as the crisis in the Middle East show no signs of abating just yet. The situation only seems to be getting complicated on a daily basis and this has placed pressure on the prices of oil. Oil prices have broken through the $45 region and have reached the lowest levels for the month so far and it remains to be seen whether any buying can come in at this support level to bring about a bounce. A failure would mean that the oil traders would be looking at much lower prices in the short and medium term.
Silver prices, after their flash crash on Friday morning, seem to have settled down but like gold, they are under pressure and are trading just below $15.5 as of this writing. The break through $16 was key and this is a clear sign that the bears are in control.
This article was originally posted on FX Empire
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