Gold prices fell slightly on Tuesday, driven by the weaker dollar. However, it remained in a tight range as investors avoided making big bets ahead of a possible aggressive US rate hike. Analysts interpret the market and share their forecasts.
Ilya Spivak: The market is comfortable with the interest rate outlook!
Spot gold was trading at $1,717.70, down 0.10% at press time. U.S. gold futures slid 0.17% to $1,717.2. Even though the dollar fell against its rivals, it managed to rise to its previous level afterwards. This made gold more expensive for buyers of other currencies. Ilya Spivak, currency strategist at DailyFX, comments:
We don’t really see a great deal of directional belief here. Most importantly, the market seems to be waiting for the Fed’s statement. However, for the past two weeks, the markets have been consistent with gold rising and the dollar pulling back. This shows that they are comfortable with where they think the rate outlook is headed.
“A big increase will not come from the European Central Bank again”
cryptocoin.com As you follow, the Fed is expected to raise interest rates by 75 basis points by the end of Wednesday’s policy meeting. It is possible for an increase of this magnitude to effectively close the support given to the economy during the pandemic period.
In the US, annual consumer prices saw the sharpest increase in more than four decades in June. Following this, expectations for a 100 basis point rate hike rose. However, traders lowered their bets after recent weak economic data.
Latvia’s central bank chief Martins Kazaks said in a statement that the European Central Bank may not raise major interest rates after its first half-point increase last week. Meanwhile, in an indicator of sentiment, shares of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.06 percent to 1,005.29 tons on Monday.
Daniel Pavilonis: Fed decision is the main factor for gold prices
Daniel Pavilonis, senior market strategist at RJO Futures, says the biggest factor affecting gold is the expectation of a Fed meeting. He also notes that Thursday’s US second-quarter GDP figures will also be a major driver. He interprets the effect of this on the market as follows:
Usually, you’ll see a sell-off in precious metals first in the Fed’s decision. This is normal.
Fawad Razaqzada: Gold prices likely to rise
City Index market analyst Fawad Razaqzada considers the size of the Fed’s move to be important. Analyst expects further dollar weakness unless the Fed raises rates by 100 basis points. Accordingly, he notes that we are likely to see gains for gold prices.
In physical markets, net gold imports from Hong Kong, the largest consumer, rose almost fivefold in June as banks stepped up purchases and Covid restrictions eased.
Pablo Piovano: For gold prices, there is possible backlash in the cards
Open interest fell for the third session in a row, this time with around 5.7k contracts, according to advanced data from CME Group for gold futures markets. Volume followed suit, shrinking to around 40,000 contracts.
Monday’s gold price pullback came amid a contraction in open interest and volume. According to Pablo Piovano, this pointed to the possibility of more gains in the very near term. The analyst says the price action in bullion appears to be consolidative. However, he sees it likely to try to rise to the $1,740 area on the short-term horizon.
