By Barani Krishnan
Investing.com – Gold as a safe haven is currently stealing gold’s luster.
It dropped to settle at $ 1,648.90 an ounce, losing $ 28.10 an ounce, or 1.7%, and contracts for the week fell by over $ 60, losing 3.5%.
While it stood at $ 1,645.24 an ounce, after dropping to $ 1640.71 an ounce.
Investing.com data shows a violent weekly drop in spot gold of nearly 4%, the worst performance since the beginning of August.
Gold broke the key support level at $ 1,650 an ounce, but with the possibility of a spike in inflation, the dollar retreated slightly during the previous day as gold regained heavy losses.
Selling pressures on gold continued on Friday, with the US dollar rising for the previous session over 8 sessions, and the yen, Canadian dollar and Swiss krona fell against it, and technical analysis suggests that the dollar will reach 120.
While 10-year yields have risen to the highest levels of the last 14 years.
The dollar and bond yields are the biggest beneficiaries of the Fed’s rate hike, after the Fed hiked interest rates by 300 basis points this year and is expected to rise another 125 points this year.
It is impossible for gold to benefit from recession fears or inflation expectations due to rising interest rates, the continued flow of US dollar cash and short-term bonds at the expense of the yellow metal.
“Inflation appears to be stubborn and could last longer than expected,” says Craig Erlam of Onda. “This is not in favor of gold in the short term, and gold could test $ 1,640 an ounce soon, with September lows likely to appear later.”
Friday’s drop in gold came after weak retail sales data as inflation rose to a 40-year high and weighed on consumer appetite, the most important sector of the US economy.
It stabilized with no growth last month, below the expected 0.2%, compared to 0.4% in August.
It reached 8.4% per annum, compared to 9.4% previously.
Retail sales are an important indicator of consumer spending, accounting for 70% of GDP.
The data follows the consumer price index which last month showed an increase of 0.4%, double the expected and 4 times higher than that recorded in August. Annual growth in September was 8.2%, a figure not far from the 9.1% recorded from the beginning of the year to June.
The data indicates that the Fed is still a long way off and unresponsive to the Fed’s war.
“Given the acceleration of core inflation,” Oxford’s Matthew Martin said in a statement. “With slowing global trade, rising rates and falling GDP, lower demand will drive import prices down if we drop any surprises for supply chains.”
Economists warn that the Fed could push the economy into a deep recession with the strongest rate hike in the past 40 years, citing the bullish housing market and the stock market as two of the Fed’s main casualties.
So far this year it has fallen by 25% and the Nasdaq has fallen by 33%.
Mortgage rates rose 6.7% two weeks ago, the highest levels in 15 years, when the Federal Reserve raised interest rates, raising interest rates on mortgage debt.
