Gold declines on a strong dollar and evident jitters
Gold continued to decline this morning after the Federal Reserve announced new easing measures to help stimulate the recovery yet still was short of expectations and only boosted the dollar on a dire outlook for the economy which kept gold biased to the downside.
The precious metal continued the downside move today after opening in Asia at $1781.85 recording the high of $1786.15 and the low of $1766.12 per ounce and currently trading bearishly around $1771.22 an ounce.
We can see the selloff clear across the board, where the Federal Reserve yesterday did not rise up to the occasion as investors expected and the measures announced fell short of their downbeat outlook for the economy.
The FOMC warned of the significant downside economic risks and said it will buy $400 billion of long-term debt while selling the equal amount in short-term securities to help stimulate the recovery by putting the lid on long term yields.
Surely the news would have supported gold in normal terms, yet only we can saw that the long term bullishness is only gaining momentum! The Fed as the rest of the world blamed the agony on Europe and the financial market strain stemming from the debt crisis which is still a good reason preventing gold from sliding deeper to the downside.
For now the dollar is the winning horse and the rally for greenback put more downside pressure on the metal that is even too expensive for non-dollar investors that are suffering from losses on all fronts, which for now is making gold subject to liquidation more than demanded for safety.
The dollar extended its upside gains and rallied to the upside today on the back of what is termed now a fed disappointment as the USDIX is currently trading at 78.00 rising from the low of 77.33.
More volatility and choppy trading is expected for the metal, especially that the bearishness now is still see correctional and we can see the downside move extend with the breach of 1754.00, still areas of 1,700 remain psychologically important to hold up the overall bullish outlook over the medium term as a breach of which might see the downside correction continue towards $1,500 areas!