Gold futures experienced the largest percentage drop, even bigger than January 8, 2021, when market forces drove the precious metal 4.18% lower.
This follows yesterday’s $43.80 decline, which occurred after the FOMC meeting had concluded, the Fed statement was released, and Chairman Jerome Powell held his press conference.
The Federal Reserve left interest rates near zero and is forecasting to keep the current Fed’s funds rate until at least the end of 2022.
Considering that the dollar opened at 90.15 yesterday and closed at 91.92 today, gaining almost 2% , today’s move accounts for almost the total year-to-date gains of the dollar index, which is 2.2%.
Dollar strength was certainly a contributing factor to gold’s sharp selloff over the last two days.
So where could gold trade from here? On a technical basis, the lows achieved today at $1767.30 came right to the 61.8% Fibonacci retracement of the rally, which began in April at $1680 up to the highs of May at $1918.
Using a larger data set to create a Fibonacci retracement from the lows of March 2020 when gold was trading at $1450 and concluding at the record high of $2088, gold futures closed very near the 50% retracement of $1768.70.
Gold as a haven asset has lost some luster and could trade to the price points mentioned above.
According to Dow Jones Newswires, “As the world’s biggest buyer of a range of industrial commodities, China is using its market heft to try to quell the sharp rise in global metal prices over the past 12 months, including a 67% surge in copper, a bellwether for macroeconomic health.
It takes roughly 10 years to build a new copper mine and years just to expand an existing one, so even if copper were at a whopping $10 a pound, a “meaningful supply response would not be possible in the near term,” Fine says.