Dollar Price Up, Gold Down

World gold prices fell in yesterday’s trading. The strengthening of the United States (US) dollar exchange rate was the cause of the fall in the price of the precious metal.

On Tuesday (12/11/2024), the world gold price on the spot market closed at US$ 2,597.92/troy ounce. Down 0.99% from the previous day and the lowest since September 20 or almost 2 months.

The price of gold has also fallen for 3 consecutive days. During those 3 days, the price was cut by 4.09%.

In the past week, the price of gold has fallen 5.38% point-to-point. Over the past month, the price has decreased by 1.94%.

The appreciation of the US dollar exchange rate is a negative sentiment for the price of gold. This is because gold is an asset that is priced in US dollars.

The strengthening of the US dollar makes gold more expensive for investors holding other currencies. Demand for gold decreases, and prices follow suit.

Yes, the US dollar is indeed strong. Yesterday, the Dollar Index (which reflects the position of the greenback against 6 major currencies) rose 0.46% to 105.95. This is the highest since June 26 or almost the last 5 months.

Dollar Index (Source: Bloomberg)

Donald Trump’s election as US President is a strong medicine for the currency of Uncle Sam’s country. During the campaign, Trump repeatedly emphasized his commitment to making the US dollar strong again, strong dollar.

In addition, Trump is also known for his aggressive foreign policy by implementing an increase in import duties on imports from various countries. This will cause the price of goods and services in general to increase, inflation will skyrocket.

If this policy is implemented and inflation increases, it will be difficult for the Federal Reserve to lower interest rates. The Fed’s 2% inflation target could be threatened.

Meanwhile, gold is an asset that does not provide a return (non-yielding asset). Holding gold will be less profitable when interest rates are still high.

Technical Analysis

Technically, with a daily perspective (daily time frame), gold is increasingly being dragged into the bearish zone. This can be seen from the Relative Strength Index (RSI) which is 37.22.

RSI below 50 indicates an asset is in a bearish position. If it reaches below 30, it means it is oversold.

While the Stochastic RSI indicator has touched 0. It is already at its lowest, very oversold.

Therefore, the price of gold has the opportunity to rise. The closest resistance target is US$ 2,654/troy ounce which is the Moving Average (MA) 5. However, this can be achieved if the pivot point of US$ 2,639/troy ounce has been penetrated.

The closest support target is US$ 2,563/troy ounce. A penetration at this point could cause the price of gold to fall again towards US$ 2,538/troy ounce which is the MA-100.