Jakarta, CNBC Indonesia – In the last 3 trading days, the price of gold kconsistently under pressure. After briefly closing in on the psychological level of US$ 1,900/troy ounce, gold prices reversed direction.
Tuesday (15/6/2021), world gold prices on the spot market weakened 0.15% to US$ 1,863.2/troy ounce. Coinciding with the weakening of gold, the price of Bitcoin digital assets actually rose and returned to the level of US $ 40,000. Meanwhile the dollar index also remained strong at 90 levels.
This week the market looks forward to a meeting of policy makers at the United States central bank The Federal Reserves (The Fed). Interest rates are likely to be held at near zero percent levels. However, the market’s attention is the stimulus provided by the Fed through quantitative easing (QE).
At the previous meeting, members of the policy-making committee had begun to discuss that the most powerful central bank should start discussing a tapering plan if the US economy is consistently on the recovery path.
Tapering is a negative sentiment for gold. This policy was carried out by the Fed several years ago. The price of gold which had reached its highest level in 2011 immediately fell when the Fed signaled a tapering.
In fact, tapering serves to slightly put the brakes on the rapidly growing economy to prevent overheating due to high inflation. In the last two months, inflation in the US has risen above the central bank’s target of 2%.
US inflation in April was recorded at 4.2% and then rose again in May to 5%. Inflation is a positive catalyst for gold prices. However, high or too low inflation (deflation) is the enemy of the economy, so policy makers will not allow it.
Tapering that plays a role in sucking up excess liquidity in the financial system will tend to strengthen the US dollar, which has been the enemy of gold. The strengthening of the US dollar and bond yields made the opportunity cost of holding unproductive assets such as gold to rise and made it unattractive.
In the futures market, big money companies, such as hedge funds, are still bullish on the prospect of gold, but they have begun to reduce their long positions and take short positions on gold futures contracts. This indicates that gold is starting to experience profit taking.
Data The Commodity Futures Trading Commission (CFTC) showed that long positions in gold contracts (gross) fell by 2,233 contracts to 145,037. Meanwhile, short positions increased by 76 contracts to 37,373.
On a net basis, investors still took long positions of 107,664 contracts. However, the position decreased by 2% compared to the previous week.
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