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How To Trade Gold With A Strong Dollar Right Now

January 4, 2022
Frank Cabibi

It should come to no shock as to why the USD is getting stronger after the Fed's recent statements. The fact that we are seeing a massive shift of money into the dollar helps us determine the overall direction of the safe-haven This can also cause a reverberation throughout other markets as well, such as the gold bullion. So, before you start your 2022 off, we suggest taking a look on how to trade gold right now amidst a powerful greenback.

Higher Treasury Yields

US 10-year bond yields spiked to 1.6710% before resting at the 1.6500s%. Yields are up .035% on the day as of writing this. If we continue to see growth like this, investors might find more security in the bond market. And that could lead to less money in stocks and gold. The Fed will meet again in a few months to talk about future monetary policy which has been a main driver in bond yields in recent months as higher interest rates means stronger dollar.

The 10-year treasury is still under under the highs of 1.74% that were reached back in March of 2021.

https://www.cnbc.com/quotes/US10Y

Higher Interest Rates

It has been 3 years since an interest rate hike, and there is an expectation of one to be announced in the Fed meeting in March. If we do see the three hikes Powell promised in 2022, we could be in for a year of bearish activity in the inflation-hedger, gold.

How To Trade Gold

It seems that all of the fundamental reasons that should have driven gold higher are now fading. The combination of higher interest rates, stronger treasuries, and the end of Fed tapering will all contribute to the better performance of the dollar. This will directly affect XAUUSD in a negative way and cause lack-luster performance throughout the year. Additionally, a more hawkish approach in monetary policy will only hurt gold even more.

A possible head and shoulders pattern could be forming on the 1D as well as being caught up in a wedge pattern. Should price fail to move above resistance around $1825, head and shoulders will form suggesting a bearish move. Some analysts expect lower lows to the $1600s during the year which seems likely if the metal breaks under its wedge pattern.

To read more content on gold, check out our other articles here.

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DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
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