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Gold has fallen for the third consecutive time and is trading at $1687 as of this writing. Silver is up 14 cents to $19.56.
Gold 1h-graph Source: TradingView
The Fed interest rate has once again supported the dollar and the XAU/USD is poised for a significant collapse. It is expected to close on Thursday, if the price closes below the support level of $1693, it will confirm the pattern of an inverted cup with a handle.
In this pattern, the price starts moving up, stabilizing at the top and not giving in to further upside. Sellers drop the price to the previous low and try to retest the support level. This is how a cup handle is formed, which is a short period of consolidation with reduced volume. After the price breaks the lowest point of the pattern, the pattern is considered confirmed and the price will continue to move downward.
If the price breaks below $1693, there will be a test of the 2022 low at $1681, and the next low is the 2021 low at $1677.
At the same time, the next strong resistance is at $1707 and by breaking it, the gold will go bullish. Next are the levels of $1710 and $1715, which will give the bulls confidence.
What to expect next ?
The buying power of the dollar has declined sharply over the last two years. Purchasing power falls when the money supply grows.
Over the past twenty years, the money supply in the U.S. has grown at a record high, from $4.6 trillion in 2000 to $19.5 trillion in 2021. This was also affected by the 2008 crisis and the pandemic in 2020. In 2020, approximately 20% of all U.S. money was created, which is $3.4 million(Visualcapitalist data).
Since the founding of the Fed in 1913, the dollar has had the same purchasing power as $26 in 2020. Since 1971, when the U.S. broke the dollar’s link to gold, it has lost about 86.5% of its purchasing power.
Gold remains vulnerable in the current realities of inflation and Fed rate hikes. Now all eyes are on the second half of the week in the U.S. and there may be new opportunities for gold trading accordingly the gold price forecast update.
Read also: The Best Investment Strategies, Advantages-Disadvantages.
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