Gold’s swift drop to trade at its lowest price since March has highlighted a tough truth for the precious metal – that there is a growing list of reasons to be gloomy.
While Monday’s flash crash was exaggerated by a combination of technical factors and poor liquidity, the initial trigger remains true – strong US jobs data showed the world’s largest economy is well on its way to recovery.
That sets the stage for the tapering of stimulus by the Federal Reserve, potentially removing one of the key drivers that helped send gold to a record last year.
A strengthening dollar and growing expectations that inflation will prove manageable are adding to the headwinds. Exchange-traded funds have also cut their holdings significantly this year.
Gold traded 1.9 per cent lower at $1,730.13 an ounce by 4.33pm in New York, after earlier tumbling by as much as 4.1 per cent. Bullion futures for December delivery fell by 2.1 per cent to settle at $1,726.50 on the Comex.
Investors will now turn their attention first to the US inflation data scheduled for later this week, and then ahead to signals from Fed officials at the Jackson Hole conference later this month. The timetable of tightening by the US central bank is key, and hawkish talk from chairman Jerome Powell could spell the start of a definitively bearish market for bullion.
Is it downhill from here for gold? Here are five important things to watch out for:
No hype
Gold’s drop after payrolls beat expectations last Friday was triggered by a sharp rise in inflation-adjusted Treasury yields, which determine the opportunity cost of holding the non-interest bearing metal.
But when yields dropped deeper into negative territory in the past month, gold prices failed to benefit.
That shows how negative sentiment has become for bullion after the metal’s relatively poor performance this year. Gold is an asset that thrives on momentum and can be left vulnerable if the price fails to rally for a long time. Further rises in real rates driven by strong economic data could spark more precipitous drops.
It is hard for it to be bullish for gold at the moment
Marcus Garvey,
head of metals strategy at the Macquarie Group
Inflation fading
Whether rising prices associated with economies reopening will prove transitory or persistent has been a major theme for markets in 2021. Gold’s relationship with inflation is complicated – it is often touted as a hedge against runaway price gains but has historically tended to benefit mostly when they coincide with periods of high unemployment.
So far, the market is pricing in transitory inflation, as demonstrated by the fall-off in US breakeven rates further down the curve. That would imply healthy and controlled price increases that would not benefit gold. The consumer price index due on Wednesday will prove the latest gauge for investors and is expected to be more muted compared with previous months.
“It is hard for it to be bullish for gold at the moment,” said Marcus Garvey, head of metals strategy at the Macquarie Group.
“If it does soften and show that some of the recent price gains are easing, then there is less upwards impetus for inflation. But that does not really reduce taper expectations because inflation is already sufficient to be ticking the box.”
Dollar’s return
A major driver of gold’s strong performance last year was a protracted weakening of the dollar. Fast forward to 2021 and there are signs that we may see that trend reverse, putting pressure on bullion.
Strong US jobs data raised expectations for Fed rate increases, giving the dollar its biggest gain in about a month on Friday.
Meanwhile, money markets indicate the European Central Bank will not tighten until at least mid-2024. That sets the stage for a stronger greenback, which would hurt gold.
Technicals
Gold’s plunge on Monday has broken below the neckline of a weekly head and shoulders pattern that may embolden bears in the medium term. Unless gold ends the week above the neckline, which currently lies at about $1,760, the outlook would remain weak based on the technical analysis.
Prices also tested and broke below the 100-week simple moving average, before pulling back. This average has offered support to prices most times since the December 2015 low. It lies at $1,738 for this week and will be watched closely by bulls and bears alike.
“Gold is now technically toast and requires some resilience to stave off some key levels,” Nicky Shiels, head of metals strategy at MKS (Switzerland), wrote in a note. “On the topside, a retaking of $1,750 would help install confidence and hold off a move lower.”
ETFs exodus
Bullion-backed ETFs were a pillar in driving the metal to a record last year. But successful vaccine campaigns and stronger-than-expected recoveries in the western world prompted investors ranging from family offices to pension funds to cut their ETF holdings significantly this year, particularly in the first quarter.
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UAE currency: the story behind the money in your pockets
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Traits of Chinese zodiac animals
Tiger:independent, successful, volatile
Rat:witty, creative, charming
Ox:diligent, perseverent, conservative
Rabbit:gracious, considerate, sensitive
Dragon:prosperous, brave, rash
Snake:calm, thoughtful, stubborn
Horse:faithful, energetic, carefree
Sheep:easy-going, peacemaker, curious
Monkey:family-orientated, clever, playful
Rooster:honest, confident, pompous
Dog:loyal, kind, perfectionist
Boar:loving, tolerant, indulgent
The Details
Kabir Singh
Produced by: Cinestaan Studios, T-Series
Directed by: Sandeep Reddy Vanga
Starring: Shahid Kapoor, Kiara Advani, Suresh Oberoi, Soham Majumdar, Arjun Pahwa
Rating: 2.5/5
If you go
The flights
There are various ways of getting to the southern Serengeti in Tanzania from the UAE. The exact route and airstrip depends on your overall trip itinerary and which camp you’re staying at.
Flydubai flies direct from Dubai to Kilimanjaro International Airport from Dh1,350 return, including taxes; this can be followed by a short flight from Kilimanjaro to the Serengeti with Coastal Aviation from about US$700 (Dh2,500) return, including taxes. Kenya Airways, Emirates and Etihad offer flights via Nairobi or Dar es Salaam.
I Feel Pretty
Dir: Abby Kohn/Mark Silverstein
Starring: Amy Schumer, Michelle Williams, Emily Ratajkowski, Rory Scovel
START-UPS%20IN%20BATCH%204%20OF%20SANABIL%20500'S%20ACCELERATOR%20PROGRAMME
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Auron Mein Kahan Dum Tha
Starring: Ajay Devgn, Tabu, Shantanu Maheshwari, Jimmy Shergill, Saiee Manjrekar
Director: Neeraj Pandey
Rating: 2.5/5
The specs
Engine: 2.7-litre 4-cylinder Turbomax
Power: 310hp
Torque: 583Nm
Transmission: 8-speed automatic
Price: From Dh192,500
On sale: Now
The years Ramadan fell in May
The specs
Common to all models unless otherwise stated
Engine: 4-cylinder 2-litre T-GDi
0-100kph: 5.3 seconds (Elantra); 5.5 seconds (Kona); 6.1 seconds (Veloster)
Power: 276hp
Torque: 392Nm
Transmission: 6-Speed Manual/ 8-Speed Dual Clutch FWD
Price: TBC
Common OCD symptoms and how they manifest
Checking: the obsession or thoughts focus on some harm coming from things not being as they should, which usually centre around the theme of safety. For example, the obsession is “the building will burn down”, therefore the compulsion is checking that the oven is switched off.
Contamination: the obsession is focused on the presence of germs, dirt or harmful bacteria and how this will impact the person and/or their loved ones. For example, the obsession is “the floor is dirty; me and my family will get sick and die”, the compulsion is repetitive cleaning.
Orderliness: the obsession is a fear of sitting with uncomfortable feelings, or to prevent harm coming to oneself or others. Objectively there appears to be no logical link between the obsession and compulsion. For example,” I won’t feel right if the jars aren’t lined up” or “harm will come to my family if I don’t line up all the jars”, so the compulsion is therefore lining up the jars.
Intrusive thoughts: the intrusive thought is usually highly distressing and repetitive. Common examples may include thoughts of perpetrating violence towards others, harming others, or questions over one’s character or deeds, usually in conflict with the person’s true values. An example would be: “I think I might hurt my family”, which in turn leads to the compulsion of avoiding social gatherings.
Hoarding: the intrusive thought is the overvaluing of objects or possessions, while the compulsion is stashing or hoarding these items and refusing to let them go. For example, “this newspaper may come in useful one day”, therefore, the compulsion is hoarding newspapers instead of discarding them the next day.
Source: Dr Robert Chandler, clinical psychologist at Lighthouse Arabia
Zayed Sustainability Prize
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What is 'Soft Power'?
Soft power was first mentioned in 1990 by former US Defence Secretary Joseph Nye.
He believed that there were alternative ways of cultivating support from other countries, instead of achieving goals using military strength.
Soft power is, at its root, the ability to convince other states to do what you want without force.
This is traditionally achieved by proving that you share morals and values.
How to apply for a drone permit
- Individuals must register on UAE Drone app or website using their UAE Pass
- Add all their personal details, including name, nationality, passport number, Emiratis ID, email and phone number
- Upload the training certificate from a centre accredited by the GCAA
- Submit their request
What are the regulations?
- Fly it within visual line of sight
- Never over populated areas
- Ensure maximum flying height of 400 feet (122 metres) above ground level is not crossed
- Users must avoid flying over restricted areas listed on the UAE Drone app
- Only fly the drone during the day, and never at night
- Should have a live feed of the drone flight
- Drones must weigh 5 kg or less
