Gold prices have fallen sharply, thanks to both indications that the Federal Reserve is set to raise rates later this year and lower tensions in the Korean Peninsula. Yesterday, Federal Reserve Chair Yellen suggested that interest rate hikes were likely in the future, despite inflation remaining below 2%. This led to an appreciation in the dollar and a sell-off in gold. Looking at geopolitical risks, tensions are subsiding following Trump's conciliatory remarks. The President recently thanked China for its efforts in reigning in North Korea - China has instructed its banks to end all relationships with North Korean individuals and institutions.
After its most recent peak close to $1,310, gold is now trading under $1,300. The precious metal is currently trading close to $1,288 after falling as low as $1,285 earlier today. Our short-term and medium-term outlook on gold remains bearish.
After falling below $1,300 on Yellen's comments on September 26, gold is back to bearish. The Federal Reserve Chair reiterated the need to continue hiking rates, despite uncertainty regarding the future path of inflation. Gold previously entered overbought conditions in early September, and have now entered normal conditions. This is based on the Relative Strength Index of the precious metal on a daily chart.
Looking at the medium term picture, we are further downgrading our outlook on gold to bearish. Gold is currently correcting, having entered overbought conditions in early September. Since then, prices have entered normal trading conditions, looking at the Relative Strength Index on a weekly chart.