Gold and copper prices continue to slump as the U.S. dollar extends to new 20-year highs amidst growing fears of rising interest rates and a potential global economic recession.
The yellow metal has tumbled after breaking the $1,680 and is now targeting the $1,600 level with the $1,580 level the next key technical support level to watch on the charts.
Precious metals started to come under pressure after the U.S. central bank hiked interest rates and warned of potential economic pain as it looks to combat runaway rampant inflation.
Gold prices have suffered big losses this year as the prospect of rising yields pushed traders into the U.S dollar and U.S. bonds. Traders are now braced for more losses.
Silver prices have been holding up much better than other precious metals. The shiny metal has held its ground recently despite being well down on a year-to-date basis.
It is thought that the wide-spread industrial uses of silver and the fact that silver is in wide demand during times of geopolitical uncertainty are the reasons the metal is holding up better than gold and copper.
Speaking of copper, the red metal has tumbled nearly 5% last week after a swathe of weak economic readings raised concerns over a slowdown in global economic growth.
Copper prices have been hit particularly hard this year by an economic slowdown in major importer China. Slowing industrial activity in the U.S. and Europe has only exacerbated recent losses.
Precious metals are likely to continue their current down move due to the fact that the U.S. dollar index continues to strengthen, and the Fed are in aggressive rate hike mode.
Generally, gold prices tend to fare poorly when the Fed hikes interest rates because gold is non-yielding. With the Fed outwards projection for a 5 percent interest rate in the United States it makes sense that we see yield hunters dumping gold and heading in bonds.
