Gold Rally May Have Hit Plateau

Since the height of the pandemic, the price of gold has been hitting record highs. Last week, the price of gold also rose after the publication of lower than expected nonfarm payrolls. However, this was short lived as the price declined later in the week, falling below $1,800 on Wednesday.

This decline is bearish for the yellow metal and shows its inability to maintain gains in the current environment, which displays the metal’s innate weakness. It should be noted that the recent drop in gold prices was at least partly brought about by new developments in the financial markets, such as the rise in bond yields and the U.S. dollar strengthening.

Interest rates increased and the dollar strengthened amid an increase in risk aversion, with analysts noting that higher yields and the U.S. dollar strength weren’t enough to account for the decline in the price of gold.

At the moment, it seems gold wants to trade lower, with many deeming the fact that gold is deemed to be a safe-haven asset frustrating, as the metal’s price declines when investors become risk averse. A few weeks ago, the Feds announced that interest-rate tapering would likely begin later in November of this year.

In addition, last week, the New York Fed president John Williams made some remarks at St. Lawrence University that suggest that the Federal Open Market Committee may wait till later in the year to make any movements. In his statement, Williams noted that progress toward maximum employment had been made, noting that if the economy continued to improve, decreasing the pace of asset purchases would likely begin this year.

At the moment, economic activity has decreased, partly because of the spread of the delta coronavirus variant. Economic growth in July and August also declined slightly to a moderate pace, with the decline in economic activity being mainly attributed to international travel restrictions, an increase in safety concerns as cases of thedDelta variant increase and a decrease in tourism, travel and dining out in some districts.

With no plans to combat inflation any time soon, the decline in economic growth is bound to push the economy into stagflation, which will be a good macroeconomic environment for gold. Gold is currently focused on the Fed’s upcoming tightening cycle and economic normalization after the pandemic recession.

To rally decisively, gold requires more than the delaying of tapering by the Federal Reserve. Until this occurs, the metal is likely to continue struggling. While day traders may call such fluctuations “struggling,” precious metals sector players such as Asia Broadband Inc. (OTC: AABB) are unlikely to be fazed by those day-to-day market adjustments since they are in the game for the long haul.

NOTE TO INVESTORS: The latest news and updates relating to Asia Broadband Inc. (OTC: AABB) are available in the company’s newsroom at https://ibn.fm/AABB

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