On Tuesday, the gold prices held at the lowest levels of a week with the betting that investors’ aggressive tightening plans would keep their interest rates high for a long time and increase the US treasury interest rates and thus the dollar. Expert names are trying to estimate the next price movements of gold and question if there is a safe port.
“The high movement in US interest rates scares gold investors”
At the beginning of the session, gold bullion has reached the lowest level since June 1, touching $ 1,836,10. US gold futures remained fixed at $ 1,843,70. SPI Asset Management Manager Stephen Innes is making the following assessment:
This week, the US interest in US interest rates are frightened by gold investors this week. The dollar rises after these high interest rates.
JP Morgan’s third quarter gold prices expectation $ 1,800
The display rose to the highest level of the 10 -year bond phases to the highest level of a month. Analysts in JP Morgan expects the Gold Trade to be softer for an average of $ 1,800 in the third quarter due to an expected recovery in investor risk sensitivity and the ongoing increase in US interest rates.
Kriptokoin.comAs you have followed from the news, the federal reserve on the road and last week for half -point interest rate hikes in June and July increased the ongoing tightening expectations of the US Federal Bank.
“We are in an environment of interest rate hikes that are bad for gold prices”
However, the CPI report, which will be announced on Friday, will give more clues to the speed of US interest rate hikes. The European Central Bank will also meet next week with the increase in interest rate hikes of investors this year. Stephen Innes interprets the subject as follows:
Finally, we are in a global central bank interest rate hike environment, which was initially bad for gold. However, of course, interest rates come with the results of economic growth, so gold continues to remain cautious.
“Gold can be bound to the range of around $ 1,850 when you start summer trade”
Have we entered the summer trade? Gold prices are fixed to the $ 1,850 range, and TD Securities strategists expect the yellow metal to be treated close to this level. Strategists explain their predictions as follows:
Gold prices, quantitative tightening and the market, the Fed’s way to hike on the horizon of aggressive interest rate hike, previously anchored to $ 1,850, which had a significant amount of open interest rates in the option markets. Summer trade officially started, which shows that prices may be bound to the range of around $ 1,850. However, the installation for additional liquidations on the horizon continues.
How does the relationship between gold prices and inflation work?
Jeff Christian, General Manager of GoldForecast.com Editor Gary Wagner and CPM Group, says gold is a long -term protection from the risk of inflation and a safe port. In addition, both agree that gold is a precaution against stock market volatility under certain conditions.
Referring to the idea that the role of gold as a means of protection from inflation, the price should follow the inflation rate, Christian says that yellow metal does not protect from risk in the short term and does not rise when low -digit inflation does not rise:
The correlation between inflation and changes in gold prices is 9 %. Gold is good in protecting you against hyperinflation, but it is not particularly good to protect you from inflation that gnaws 1 to 3 %.
Hypenflation is generally defined as an increase of at least 50 %per month at prices. Although Wagner participates in Christian’s analysis, he adds that gold is a long -term protection tool from the risk of inflation and uses the following:
Gold is an excellent hedge against inflation, but not sensitive to short -term movements. But over time, we saw that it has the same purchase power. In 1910, you could buy a night in Plaza with an ounce of gold. Today you can still buy the same items a ounce of gold.
Is gold really a safe port?
Christian describes the presence of a safe harbor as a low correlation with stocks and bonds, thus protecting investors against volatility. “In general, the correlation between gold and stocks is in the long term -4%to 5%.”
Stock markets have experienced large sales with the fall of S&P 500 to date. Christian adds that these recent events show the safe port characteristics of the gold, and says, “The second quarter was bad for gold, and it’s probably going to fall.” Christian makes the following assessment:
However, if you look at the first quarter, silver was the best performance among 11 asset classes with an increase of 7.7 %compared to the first quarter. Gold took second place with 6.6. If there is someone who says that he does not do his part in preserving the value of the portfolio of gold and silver, this is the result of the bad American education.
Wagner generally says that the stocks and gold move in the opposite directions. However, it emphasizes quantitative expansion as an exception of this trend:
If you look at the 2008 liquidity in the markets, both US stocks and gold prices have increased.
