- Rising risk aversion sentiment in the marketplace is not providing much support for gold as investors continue to react to Fitch Rating's announcement, downgrading the U.S. government's long-term debt to 'AA+' from 'AAA.
Michele Schneider, director of trading education and research at MarketGauge, said that she sees the price action in the marketplace as a liquidity event as spooked investors move into cash. In its announcement, Fitch said it sees the U.S. general government deficit rising to 6.3% of GDP in 2023, up from 3.7% in 2022. The deficit is expected to grow by 6.6% and 6.9% of GDP in 2024 and 2025, respectively.
"The gold market is going to struggle as long as re-steepening of the US curve continues," he said."The VIX is rising and it seems Wall Street is getting nervous here. Gold will eventually act like a safe-haven as stocks remain vulnerable given rising downbeat outlooks." Nicky Shiels, metals strategist at MKS PAMP, said in a note to clients, that markets are almost incomparably different now vs 2011. Looking at gold prices, she said it will be difficult for the precious metal to rally as the U.S. dollar and bond yields continue to rise.
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