Disclaimer - Nothing in this post is financial advise
Gold hits its lowest level in a year
The gold price came under pressure last week as it closed below its major support level at about $1,700 on Wednesday, the 20th of July.
A mark that has already provided support three times. Nevertheless, the movement in the precious metal does not yet indicate a bottom.
A strong dollar puts pressure on the gold price
The weak performance of gold is closely related to the currently strong dollar. While one dollar was worth 0.85 euro last year on the 23rd of July, you now get 0.98 euro. Compared to the Yen, the exchange rate for one dollar last year was 110 Yen, today, one dollar is worth 136 Yen.
Mining stocks reacted sensitively to the gold price decline this week.
The GDX came under pressure and buckled by more than three percent. Meanwhile, all stocks in the GDX are trading below the 200-day line.
Mining stocks could cut dividends if the gold price keeps diving
For the second quarter, for example, the sector-leading gold producer Barrick Gold(Ticker: GOLD) achieved an average selling price of $1,871. That should keep the dividend for the second quarter at $0.20. However, if the gold price falls below $1,700, it is possible that the company can't stick with its current dividend payout.
Yet, after the recent decline in share price, Barrick Gold is already trading at a 40% discount from its 52-week highs.
Outlook
Many Investors now expect that a US recession would force the Fed to slow its aggressive policy tightening path. This could also be seen in the latest decline in the US Treasury bond yields, which further offered some support to the non-yielding gold.
Due to the current environment, the focus remains on the outcome of the two-day FOMC meeting. Which is scheduled to be announced on Wednesday, the 27th of July. The outcome of this meeting could dictate if gold continues its recent downtrend or start a reversal.
Disclaimer - Nothing in this post is financial advise
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