The reasons of gold price fell yesterday. 22/11/2021

Yesterday we saw the gold price decrease against the dollar. The most likely reasons for the decline are the lack of demand for physical gold and the lack of interest in buying for fundamental reasons.

The re-appointment of Jerome Powell for a second term by Biden as head of the Federal Reserve can cite as the most fundamental reason for the aggressive sale of gold, the factor that caused the dollar increase and gold price fall sharply. Improving inflation data and forecasting interest rates hike in the United States were other factors that led to the peak of the dollar index and the sale of gold or the settlement of buying transactions.

Market participants are currently waiting for the PMI report print, which may affect the value of gold and boost expectations for tightening (Hawkish). Inflation news and the FOMC minutes on Wednesday are also likely to have a significant impact on the gold price trend.

If we look at the gold chart, we see that in 2020 the price of gold increased by almost 22% and reached above $ 2,000, and the main reason was the Covid-19 worries, which made gold the safe haven for investors.

Gold has faced a couple of challenges in recent days, now we will take a look at the challenges ahead.

Central banks are one of the biggest buyers of gold and a major factor affecting the gold price. But according to bank experts, there are signs of a decrease in demand.

Another possible factor is changes in the macroeconomic. In the world, the gold price is not line up with the inflation rate and caused gold buyers to step back. Extensive vaccinations around the world have also eased investors’ minds, so most investors sell off gold.

In other words, gold as a valuable old commodity no longer can be a safe haven for investors, and no wise person would buy gold in the hope that it might become more expensive next year. Instead, now buying gold is a hedge for investors to protect their capital against inflation, money devaluation and eventually offset the possible loss in other investments, which today is one of the main factors in buying gold.  But as noted above, due to inflation and the value of the dollar, demand for this yellow metal has declined.

Another point that should not overlook is the role of speculators in the sudden volatility of the Forex market. In fact, speculation can consider as another factor in the devaluation of gold. Investors usually try to be informed of banks’ decisions and act accordingly.

In 2014, for example, the Federal Reserve announced that is going to end its stimulus program, thereupon gold price fell.

In another example, as India is one of the largest importers of gold in the world market, speculators once devalued the dollar by lowering customs duties on gold simply just because they were looking for a reason to sell gold.

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