Silver and Gold price analysis as investors turn to US dollar amid turmoil in Turkey
- Turkish President Erdogan fired the head of the central bank to ignite new financial crisis in this country
- Stronger dollar from this morning sent prices of gold and silver lower
- Gold prices are now trading between two important levels - $1,765 (resistance) and $1,670 (support)
Silver and gold prices slipped in Monday’s trading session after fresh turmoil in Turkey raised the appeal for the US dollar.
Fundamental analysis: Turmoil in Turkey supports the US dollar
Prices of gold and silver slipped on Monday after emerging markets investors rushed to safe-haven options including the US dollar and bonds after Turkey’s unexpected decision to replace the head of its central bank with a high-interest rates adversary, prompting financial uncertainty.
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“This morning when the Turkish Lira fell out of bid, we might have seen gold benefiting with the dollar and Japanese yen but that’s clearly not the case,” said Michael McCarthy, head market strategist at CMC Markets.
“The stronger dollar seems to be the major driver for the gold market at the moment with the currency moves … It appears that US dollar and yen remain the favorite choices,” he added.
Turkish President Recep Tayyip Erdogan fired the head of the central bank and replaced him with a critic of tight monetary policy on Saturday, a surprising decision that worsened the risk sentiment, urging investors to buy the dollar.
On the other hand, the Federal Reserve announced Friday it does not plan on extending the temporary pandemic regulatory break on capital requirements scheduled to expire this month.
Technical analysis: Precious metals dive
Spot gold prices are trading about 0.5% lower around $1,737 per ounce, after plunging 1% earlier in the session. Gold prices are now trading between two important levels – $1,765 an ounce on the upside (resistance) and $1,670 an ounce (support) looking lower. Any move below the $1,700 mark is likely to be seen as an opportunity to invest in Gold.
Silver prices have taken a stronger hit after plunging about 2% to print the 2-week low at $25.41. The price action found support in the 100-DMA at $25.57, which prompted a higher daily interest to buy Silver. The intraday resistance is located at $26.60.
Gold prices dropped 1% on Monday after investors turned to safe-haven assets like the dollar and bonds following Turkey’s unexpected decision to replace the central bank chief with an adversary of tight monetary policy, raising concerns among investors.
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