Gold prices have been following a sideways trend for a while. The expectation that the Federal Reserve will raise interest rates once again continues to put pressure on the precious metal. However, the softening in US inflation raises hopes for the coming periods. In this uncertain environment, experts and analysts are trying to determine the direction of gold.
Your recovery for gold will likely come later!
According to Commerzbank’s latest research, the gold market will likely be stuck around $1,950 for the rest of the summer as the Federal Reserve hasn’t finished raising interest rates. But Thu Lan Nguyen, head of commodities research at the German bank, predicts prices will rise to $2,000 by the end of the year, despite lowering its average price target for the third quarter.
cryptocoin.com As you follow, your horse hit a three-week high last week. Now, there is a modest profit realization in the gold market. Nguyen states that the Fed’s hawkish monetary policies continue to be the dominant force for gold in the near term. Markets expect the Fed to raise interest rates by 25 basis points this month. Also, forecasts in June are that the Fed will raise interest rates once again after the summer. In his report, Nguyen highlights the following:
Previously, we assumed that not only would the Fed end the rate hike cycle in May, but also that it would make the first rate cuts towards the end of the year, which would provide a significant support to gold. Because the precious metal is an interest-bearing investment, the outlook for returns in the US, the world’s largest capital market, is by far the most important price determinant. Recovery is likely to come later.
“ Next year, yellow metal will reach the peaks”
Commerzbank expects gold to stay at current prices for the next three months. However, the German bank predicts that the precious metal will end the year strongly. Nguyen says Commerzbank economists expect the July rate hike to be the last of the central bank’s tightening cycle. He also expects gold prices to hit $2,000 by the end of the year as recession fears begin to mount. In this context, Nguyen makes the following statement:
We continue to see some room for an upside move. This is because the Fed’s sharp rate hikes will likely be felt more strongly. It is also effective that it will become clear that the US economy is in recession. This will put an end to the remaining rate hike speculations. Gold will hit an all-time high next year if inflation falls further and the weak economy makes rate cuts even more likely.
Gold will underperform in the short term, but…
The price of gold is down 5% from this year’s high of $2,060. Here’s how ANZ Bank economists analyze the gold outlook:
The robustness of the labor market and strong economic data will enable the Fed to continue raising interest rates. This poses the risk of rising real interest rates in the short term. In such an environment, gold is likely to underperform. However, we maintain our positive outlook over the medium term as structural factors remain intact. The continued decline in inflation will eventually allow the Fed to pause the rate cycle at some point this year. Normally, the US yield starts to pull back at this point, reducing the opportunity cost of investing in gold.
The Fed’s pause in rate hikes, among other more hawkish central banks, will weaken the US dollar in the second half of this year, economists say. In addition, economists say that the risk of the US going into recession is not completely off the table. Therefore, they note that this will also attract the flow of funds to gold by 2024.
Technical analysis: Gold creates ‘Cup and Handle’ pattern
Market analyst Sagar Dua conveys what he sees in the technical drawing of gold as follows. Gold price is forming a ‘Cup and Handle’ bullish pattern, the break of which resulted in a reversal. The chart pattern is moving back and forth around $1,960.00. Gold price is likely to attract new offers after it confidently climbs above the key $1,960.00 resistance. The upside trend is likely to decline if gold price fails to continue auctioning above the $1,940.00 support.
Daily summary: Shiny metal seeks economic trigger
- Gold price continues its recovery above $1,960.00 as the US Dollar Index failed to hold above the 100.00 psychological resistance and continues its downward trend.
- Only the possibility of the Fed’s rate hike once again strengthened gold.
- Meanwhile, according to bets on the CME Group Fedwatch tool, the Fed will raise interest rates by a small 25 bps at its July monetary policy meeting.
- The BRICS alliance is negotiating a new gold-backed currency. This reduces the attractiveness of the US dollar. The reason behind a new currency seems to be de-dollarization.
- US Dollar Index tests new annual support at 99.60. Significant softening in US inflation supports further declines in the dollar.
- Continuously falling gasoline prices and demand for used cars eased inflationary pressures.
- Although inflation has softened significantly, recession risks remain high as the current price increase is still far from the desired 2%.
