Gold price nears 2.5-year low as the market shows signs of being overly concerned about interest rates

In an ideal world, market moves are in perfect sync with news, data, and other valuation matrices of an asset. 

Of course, in the real world, there are more chances for things to get too bright or murky. Thursday's gold sell-off went beyond the gloom but also irrational panic.Retail sales rose 0.3% in August, according to Commerce Department data. Falling fuel prices boosted Americans' sentiment toward other purchases, raising inflation expectations and raising interest rates. Economists had forecast a 0.2% increase.

“Gold has been brutally battered,” said Ed Moya, an analyst at online exchange OANDA. “If Treasury yields continue to rise, gold will continue to come under selling pressure. Gold will soon find support after the market gets a direct response from the Fed. "

So where is gold likely to go?

“In the short term, there could be a further drop to $1650,” said Sunil Kumar Dixit, chief technical strategist at SKCharting.com.

He noted that gold has been oversold relative to its Relative Strength indicator – predicting a recovery to the $1,686, $1,695 and $1,710 levels, respectively.

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