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Is gold’s rally over? Here are five key charts to watch
Unprecedented global stimulus, negative real rates and a weakening dollar pushed bullion to a record high above $2,075 an ounce in early August. While some banks, including Goldman Sachs Group Inc. and Bank of America Corp., forecast even higher prices, a resurgent dollar has seen gold give up some of its gains.
Is this merely a temporary setback for the precious metal? Here are five charts that provide hints as to where gold goes next: (By Eddie Spence)
“The firm U.S. dollar is like a millstone around the neck of precious metals prices, and is putting pressure on gold despite increased risk aversion,” Carsten Fritsch, an analyst at Commerzbank AG, wrote in a note. Still, Fed policy will remain expansionary for years, so “the strength of the dollar is hardly likely to last,” he said.
Breakevens -- measures that draw on pricing of nominal and inflation-linked Treasury debt to create a proxy for price gains -- have been declining since August. With the global economic recovery stuttering as the virus flares, inflation is unlikely to be uppermost in the minds of investors, according to Ole Hansen, head of commodity strategy at Saxo Bank A/S.
“ETFs increased in recent days and now they pause to see what will happen,” said Georgette Boele, a precious metals strategist at ABN Amro Bank NV. “If weakness continues, they will sell quickly again.”