Investors await US inflation data for more direction in interest rates. The gold price fell on Wednesday as US dollar and Treasury yields returned.
Why is gold not moving? As we have covered in the news
Kriptokoin.com , gold has been crushing the water a lot for the last few weeks. Edward Meir, analyst at ED&F Man Capital Markets, explains why:
I think people are a little optimistic about some inflation data. We don’t see gold really moving. This is because there is a perception that we are approaching peak inflation. Gold should gradually see higher inflation data.
As it is known, investors use bullion as a hedge against inflation. However, higher interest rates increase the opportunity cost of holding the non-yielding asset. Meanwhile, central banks began to tighten monetary policy to cool rising prices. This greatly limited gold’s gains.
Ilya Spivak: Gold price may drop next year
Reuters poll shows the US core consumer price index (CPI), due to be released on Friday, will rise 5.9% over the year . As it will be remembered, the CPI increased by 6.2% annually in April. DailyFX currency strategist Ilya Spivak says:
If the base y/y rate drops modestly as (or less) as expected, the gold price drop as interest rate hike bets for restructuring next year possible.
“To date, gold price has outstripped the S&P 500 index”
The World Bank cut its 2022 global growth forecast by nearly a third to 2.9% on Tuesday. downloaded it. The gold price closed modestly higher on Tuesday as the precious metal rebounded its consecutive losses. In this environment, investors are preparing for the second half of the year. Also, the US inflation update from the May consumer price index on Friday will be a major focus.
In 2022, stocks, bonds and many other financial assets came under sharp pressure. That’s why there is little room for investors to hide. Gold is offered as an alternative that could add diversification and help protect investors from high inflation in the second half of the year. A team led by Michael Arone, chief investment strategist at State Street Global Advisors, concludes:
To date, gold has outpaced the S&P 500 index SPX by +0.95% to 14.17%. It also demonstrated its ability to hedge against stock market downturns.
However, strategists advise investors to focus on institutional fundamentals, limiting time. Strategists say volatility may remain high in the second half of the year as the Federal Reserve tries to tighten financial conditions further to rein in inflation. For this reason, strategists recommend that investors consider inflation-sensitive alternatives, including gold.
“These are limiting gold’s upward move”
Kitco analysts assess gold’s modest gains on Wednesday. The ‘bargain hunt’ began after the yellow metal recently moved towards $1,800, according to analysts. They also cite weak US stocks and persistent inflation concerns as reasons for the move.
Commerzbank commodity analysts, however, note that the upside movement of gold has been restrained. They point to the power of DXY as the reason for this. They also add the 10-year Treasury rate holding above the 3% threshold.
“The largest denominator of the gold price movement is US inflation data”
Avatrade’s Naeem Aslam, precious metals trader’s major He says it’s pretty much lifeless. “This is because of the US May inflation data, which will be released on Friday,” the analyst says. Naeem Aslam says:
US inflation data will be released on Friday. This continues to be the biggest denominator of the gold price movement.
