Gold’s swift drop to trade at its lowest price since March has highlighted a tough truth for the precious metal – that there is a growing list of reasons to be gloomy.
While Monday’s flash crash was exaggerated by a combination of technical factors and poor liquidity, the initial trigger remains true – strong US jobs data showed the world’s largest economy is well on its way to recovery.
That sets the stage for the tapering of stimulus by the Federal Reserve, potentially removing one of the key drivers that helped send gold to a record last year.
A strengthening dollar and growing expectations that inflation will prove manageable are adding to the headwinds. Exchange-traded funds have also cut their holdings significantly this year.
Gold traded 1.9 per cent lower at $1,730.13 an ounce by 4.33pm in New York, after earlier tumbling by as much as 4.1 per cent. Bullion futures for December delivery fell by 2.1 per cent to settle at $1,726.50 on the Comex.
Investors will now turn their attention first to the US inflation data scheduled for later this week, and then ahead to signals from Fed officials at the Jackson Hole conference later this month. The timetable of tightening by the US central bank is key, and hawkish talk from chairman Jerome Powell could spell the start of a definitively bearish market for bullion.
Is it downhill from here for gold? Here are five important things to watch out for:
No hype
Gold’s drop after payrolls beat expectations last Friday was triggered by a sharp rise in inflation-adjusted Treasury yields, which determine the opportunity cost of holding the non-interest bearing metal.
But when yields dropped deeper into negative territory in the past month, gold prices failed to benefit.
That shows how negative sentiment has become for bullion after the metal’s relatively poor performance this year. Gold is an asset that thrives on momentum and can be left vulnerable if the price fails to rally for a long time. Further rises in real rates driven by strong economic data could spark more precipitous drops.
It is hard for it to be bullish for gold at the moment
Marcus Garvey,
head of metals strategy at the Macquarie Group
Inflation fading
Whether rising prices associated with economies reopening will prove transitory or persistent has been a major theme for markets in 2021. Gold’s relationship with inflation is complicated – it is often touted as a hedge against runaway price gains but has historically tended to benefit mostly when they coincide with periods of high unemployment.
So far, the market is pricing in transitory inflation, as demonstrated by the fall-off in US breakeven rates further down the curve. That would imply healthy and controlled price increases that would not benefit gold. The consumer price index due on Wednesday will prove the latest gauge for investors and is expected to be more muted compared with previous months.
“It is hard for it to be bullish for gold at the moment,” said Marcus Garvey, head of metals strategy at the Macquarie Group.
“If it does soften and show that some of the recent price gains are easing, then there is less upwards impetus for inflation. But that does not really reduce taper expectations because inflation is already sufficient to be ticking the box.”
Dollar’s return
A major driver of gold’s strong performance last year was a protracted weakening of the dollar. Fast forward to 2021 and there are signs that we may see that trend reverse, putting pressure on bullion.
Strong US jobs data raised expectations for Fed rate increases, giving the dollar its biggest gain in about a month on Friday.
Meanwhile, money markets indicate the European Central Bank will not tighten until at least mid-2024. That sets the stage for a stronger greenback, which would hurt gold.
Technicals
Gold’s plunge on Monday has broken below the neckline of a weekly head and shoulders pattern that may embolden bears in the medium term. Unless gold ends the week above the neckline, which currently lies at about $1,760, the outlook would remain weak based on the technical analysis.
Prices also tested and broke below the 100-week simple moving average, before pulling back. This average has offered support to prices most times since the December 2015 low. It lies at $1,738 for this week and will be watched closely by bulls and bears alike.
“Gold is now technically toast and requires some resilience to stave off some key levels,” Nicky Shiels, head of metals strategy at MKS (Switzerland), wrote in a note. “On the topside, a retaking of $1,750 would help install confidence and hold off a move lower.”
ETFs exodus
Bullion-backed ETFs were a pillar in driving the metal to a record last year. But successful vaccine campaigns and stronger-than-expected recoveries in the western world prompted investors ranging from family offices to pension funds to cut their ETF holdings significantly this year, particularly in the first quarter.
UAE currency: the story behind the money in your pockets
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
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TEACHERS' PAY - WHAT YOU NEED TO KNOW
Pay varies significantly depending on the school, its rating and the curriculum. Here's a rough guide as of January 2021:
- top end schools tend to pay Dh16,000-17,000 a month - plus a monthly housing allowance of up to Dh6,000. These tend to be British curriculum schools rated 'outstanding' or 'very good', followed by American schools
- average salary across curriculums and skill levels is about Dh10,000, recruiters say
- it is becoming more common for schools to provide accommodation, sometimes in an apartment block with other teachers, rather than hand teachers a cash housing allowance
- some strong performing schools have cut back on salaries since the pandemic began, sometimes offering Dh16,000 including the housing allowance, which reflects the slump in rental costs, and sheer demand for jobs
- maths and science teachers are most in demand and some schools will pay up to Dh3,000 more than other teachers in recognition of their technical skills
- at the other end of the market, teachers in some Indian schools, where fees are lower and competition among applicants is intense, can be paid as low as Dh3,000 per month
- in Indian schools, it has also become common for teachers to share residential accommodation, living in a block with colleagues
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HAJJAN
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Need to know
The flights: Flydubai flies from Dubai to Kilimanjaro airport via Dar es Salaam from Dh1,619 return including taxes. The trip takes 8 hours.
The trek: Make sure that whatever tour company you select to climb Kilimanjaro, that it is a reputable one. The way to climb successfully would be with experienced guides and porters, from a company committed to quality, safety and an ethical approach to the mountain and its staff. Sonia Nazareth booked a VIP package through Safari Africa. The tour works out to $4,775 (Dh17,538) per person, based on a 4-person booking scheme, for 9 nights on the mountain (including one night before and after the trek at Arusha). The price includes all meals, a head guide, an assistant guide for every 2 trekkers, porters to carry the luggage, a cook and kitchen staff, a dining and mess tent, a sleeping tent set up for 2 persons, a chemical toilet and park entrance fees. The tiny ration of heated water provided for our bath in our makeshift private bathroom stall was the greatest luxury. A standard package, also based on a 4-person booking, works out to $3,050 (Dh11,202) per person.
When to go: You can climb Kili at any time of year, but the best months to ascend are January-February and September-October. Also good are July and August, if you’re tolerant of the colder weather that winter brings.
Do not underestimate the importance of kit. Even if you’re travelling at a relatively pleasant time, be geared up for the cold and the rain.
More from Rashmee Roshan Lall
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PSA DUBAI WORLD SERIES FINALS LINE-UP
Men’s:
Mohamed El Shorbagy (EGY)
Ali Farag (EGY)
Simon Rosner (GER)
Tarek Momen (EGY)
Miguel Angel Rodriguez (COL)
Gregory Gaultier (FRA)
Karim Abdel Gawad (EGY)
Nick Matthew (ENG)
Women's:
Nour El Sherbini (EGY)
Raneem El Welily (EGY)
Nour El Tayeb (EGY)
Laura Massaro (ENG)
Joelle King (NZE)
Camille Serme (FRA)
Nouran Gohar (EGY)
Sarah-Jane Perry (ENG)
The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
On sale: Now
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MATCH INFO
CAF Champions League semi-finals first-leg fixtures
Tuesday:
Primeiro Agosto (ANG) v Esperance (TUN) (8pm UAE)
Al Ahly (EGY) v Entente Setif (ALG) (11PM)
Second legs:
October 23
The biog
Name: Sari Al Zubaidi
Occupation: co-founder of Cafe di Rosati
Age: 42
Marital status: single
Favourite drink: drip coffee V60
Favourite destination: Bali, Indonesia
Favourite book: 100 Years of Solitude
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Israel Palestine on Swedish TV 1958-1989
Director: Goran Hugo Olsson
Rating: 5/5
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
Results
Stage 4
1. Dylan Groenewegen (NED) Jumbo-Visma 04:16:13
2. Gaviria (COL) UAE Team Emirates
3. Pascal Ackermann (GER) Bora-Hansgrohe
4. Sam Bennett (IRL) Deceuninck-QuickStep
5. Caleb Ewan (AUS) Lotto Soudal
General Classification:
1. Adam Yates (GBR) Mitchelton-Scott 16:46:15
2. Tadej Pogacar (SLO) UAE Team Emirates 0:01:07
3. Alexey Lutsenko (KAZ) Astana Pro Team 0:01:35
4. David Gaudu (FRA) Groupama-FDJ 0:01:40
5. Rafal Majka (POL) Bora-Hansgrohe
'The worst thing you can eat'
Trans fat is typically found in fried and baked goods, but you may be consuming more than you think.
Powdered coffee creamer, microwave popcorn and virtually anything processed with a crust is likely to contain it, as this guide from Mayo Clinic outlines:
Baked goods - Most cakes, cookies, pie crusts and crackers contain shortening, which is usually made from partially hydrogenated vegetable oil. Ready-made frosting is another source of trans fat.
Snacks - Potato, corn and tortilla chips often contain trans fat. And while popcorn can be a healthy snack, many types of packaged or microwave popcorn use trans fat to help cook or flavour the popcorn.
Fried food - Foods that require deep frying — french fries, doughnuts and fried chicken — can contain trans fat from the oil used in the cooking process.
Refrigerator dough - Products such as canned biscuits and cinnamon rolls often contain trans fat, as do frozen pizza crusts.
Creamer and margarine - Nondairy coffee creamer and stick margarines also may contain partially hydrogenated vegetable oils.
Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
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RESULTS
Light Flyweight (48kg): Alua Balkibekova (KAZ) beat Gulasal Sultonalieva (UZB) by points 4-1.
Flyweight (51kg): Nazym Kyzaibay (KAZ) beat Mary Kom (IND) 3-2.
Bantamweight (54kg): Dina Zholaman (KAZ) beat Sitora Shogdarova (UZB) 3-2.
Featherweight (57kg): Sitora Turdibekova (UZB) beat Vladislava Kukhta (KAZ) 5-0.
Lightweight (60kg): Rimma Volossenko (KAZ) beat Huswatun Hasanah (INA) KO round-1.
Light Welterweight (64kg): Milana Safronova (KAZ) beat Lalbuatsaihi (IND) 3-2.
Welterweight (69kg): Valentina Khalzova (KAZ) beat Navbakhor Khamidova (UZB) 5-0
Middleweight (75kg): Pooja Rani (IND) beat Mavluda Movlonova (UZB) 5-0.
Light Heavyweight (81kg): Farida Sholtay (KAZ) beat Ruzmetova Sokhiba (UZB) 5-0.
Heavyweight (81 kg): Lazzat Kungeibayeva (KAZ) beat Anupama (IND) 3-2.
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Killing of Qassem Suleimani
