Stress factor number 1: rising interest rates
Interest rates in the US are on an upward trend. They have more than tripled since August last year. This reflects a normalization of economic growth in the course of the ongoing vaccination campaigns and the gradual removal of lockdown measures. This development was flanked by expansionary monetary policy and supportive fiscal policy. According to a forecast by the US Federal Reserve, the US economy is expected to grow by 6.5 percent in 2021. This development is driving interest rates up. Rising interest rates cloud the relative attractiveness of gold investments that do not bear interest.
Stress factor number 2: weak chart technique
In the gold price, a 123 top has formed below USD 1,863. It is now fanning out towards the bottom. The fan-out marks in the chart stand for possible support and resistance.
Gold Cash CFD, Quelle: CMC Markets
Load factor number 3: sector rotation
Dow Jones and DAX rise to new record levels. We are nearing the end of the virtual world in the pandemic, and while there will be a bit of it left, people want a return to as much normality as possible. That desire is also reflected in the choices made by investors among them, and value stocks remain sought after while technology stocks fail to build stability on the way up.
Stress factor number 4: low volatility
The volatility in the stock market is at a low level. The calm on the stock market ensures that fewer and fewer investors seek protection in gold and reduce their hedging positions in precious metal. This state does not have to be permanent. But even the crisis surrounding the bankrupt US tech stock hedge fund Archegos Capital Management did not lead to a renewed flare-up of investor interest in gold.
It all looks like the damage from the hedge fund bankruptcy will be limited to the institutions that were direct counterparties. Deutsche Bank is also giving the all-clear, stocks from the sector are starting to recover after yesterday’s shock.
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