The higher-than-expected rate hike by the European Central Bank (ECB) limited the gains in the dollar. That’s why the euro gained strength after the decline in US Treasury yields. With the effect of these developments, gold prices managed to exit from the lows on Thursday. In fact, it did a short rally. Analysts interpret the market and share their predictions for the future of gold.
“The fall in bond yields eased the pressure on gold”
cryptocoin.com As you follow, the European Central Bank increased interest rates by 50 basis points for the first time in eleven years. Following this move, the euro strengthened, putting pressure on the US dollar. Seizing this opportunity, the yellow metal managed to recover below $1,700. However, City Index market analyst Fawad Razaqzada comments:
While the euro retreated from the highest level of the day, the fall in bond yields eased the pressure on gold. That’s why the shiny metal hit weekly highs, albeit very slightly.
Jeb Handwerger: Gold prices consolidate since summer 2020
Gold is historically considered a safe-haven investment. Gold’s rise on Thursday came with mixed market sentiment. Europe weighs the outcome of a historic central bank meeting. It’s also been a strong week for risky assets like stocks. Meanwhile, maintenance of the Nord Stream 1 gas pipeline from Russia to Europe is coming to an end on Thursday. Jeb Handwerger, editor of the Gold Stock Trades newsletter service, said in a statement:
Interest rate hikes are being carried out to combat record high inflation. In this environment, gold prices have been consolidating since summer 2020. Therefore, the US dollar benefited from these gains by hitting 20-year highs compared to other currencies.
“From now on, gold prices can break $2,000”
Jeb Handwerger says gold prices won’t take off until the Fed pivots and the US dollar peaks. For this, the economy should turn negative, the housing market should start to decline and recession fears should increase. According to the analyst, it is possible that this will happen before US Labor Day. In this context, the analyst makes the following comment:
If the Fed turns or halts the march amid recession risks, stocks and housing collapses, the bottom 2-year consolidation is likely to end. After that, it is possible for gold to finally break $2,000.
Pablo Piovano: Upside limited for gold prices
Open interest on gold futures markets fell by about 9.6k contracts on Thursday, according to preliminary data from CME Group. Instead, volume rose for the second consecutive session. This time the volume was around 87.4k contracts.
Market analyst Pablo Piovano notes that the moderate recovery in gold prices on Thursday came after the lower open interest rate. Therefore, it slightly dampened expectations for further upside, according to the analyst. However, he says there is strong support in the $1,680 region, where it converged to 2021 lows.
