Gold sinks to six-month low on stronger US dollar

Gold is under further pressure below a key monthly trendline and continues to get deeper in the red territory. Gold prices slumped to their lowest in more than six months on Tuesday, as the US dollar rallied amid growing recession concerns that caused losses across risk assets.

Extra fears stem from the perception that the Federal Reserve’s rate hikes to damp inflation could have an imminent side effect of bringing about economic growth slowdown. Meanwhile, most traders, investors and market participants do believe that there are more attractive alternatives to gold in the rising interest rate environment

At $1,763, the price of gold is down on the day by 2.2% after having fallen from $1,812.19 high to $1,763.92 low. Gold has nosedived since the onset of July because of the rebounding US dollar, so the precious metal collapsed to the lowest levels since early December while the dollar takes off to a fresh 20-year high.

Gold markets are crushed after breaching the $1800 level, and then breaking below the hammer from the Friday session. By so-doing, the market would likely go much lower, breaking below the $1770 level. The price of the precious metal is trading below the rising supporting trendline on the monthly time frame but the critical fractal lows are located at $1,676.

Gold will finally find a bottom, but that obviously is what is happening right now. At this point, some analysts support the idea of shorting this market every time it bounces and every time it shows signs of exhaustion, at least until prices break above the 50 Day EMA, which is almost $100 above where they are now.

The current stance of gold suggests the scenario of a market that is going to continue to be crushed, given the impact of potential volatility, so traders are encouraged to remain cautious about their position size. Ultimately, this is a market that could further go in the current direction. This is not a sense of pessimism, rather it is the sort of caution that is based upon a healthy sense of realism.

Global equities have been under pressure because of prevalent recessionary fears that are dominating the financial markets in July. European equities weakened and this particularly impacted US equities on Wall Street supporting the fortunes of the US currency.

Investors now await FOMC Minutes on the American monetary policy June meeting, scheduled to be released on Wednesday for new clues on the likely magnitude of rate hikes in the coming months.