Gold bulls have been wondering what was going wrong over the past couple of days. Yesterday, the US Dollar Index fell to its lowest level in close to a month, yet gold, having rallied over $100 on Tuesday, was unable to hold on to its gains and then started going backwards.
It was trading above $4,000 per ounce this morning, but it looked vulnerable should another burst of selling take place. This week's softer US inflation data reduced the probability of aggressive rate hikes from the Federal Reserve's FOMC this year. That triggered the selloff in the US dollar and helped to lift gold.
Source: TN Trader
Crude oil prices remain elevated due to the resumption of hostilities between the US and Iran as they battle for control of the Strait of Hormuz. This is supporting expectations that the Federal Reserve could still raise rates later this year. For now, gold has found support just below $4,000. But a significant break below here would open the risk of a bigger tumble.
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