After a recovery move, the gold price saw a sharp decline on Friday. Thus, it recorded its worst week since mid-August. Meanwhile, the market is dominated by concerns that the Federal Reserve will continue with sharp rate hikes to curb inflation.
“Gold price will probably drop to $1,600”
Spot gold price fell 1.39% to $1,643 on Friday. It’s down about 2.9% so far this week. U.S. gold futures, on the other hand, were last traded at $1,649.50, down 1.6%. Meanwhile, the US dollar rose more than 0.6% against its rivals. This has made dollar-priced bullion more expensive for offshore buyers.
Data released on Thursday showed that US consumer prices rose more than expected in September. This provided the Fed ammunition for another big rate hike. As a result, it caused gold to experience its worst week in nearly two months. TD Securities commodity strategist Daniel Ghali says gold prices are increasingly correlated with movements in the dollar. Therefore, he notes that gold will likely fall as low as $1,600.
“Downward gold price is more in line with the data”
Gold is highly sensitive to rising US rates. That’s because the rising dollar raises bond yields and increases the opportunity cost of holding non-yielding bullion. Craig Erlam, senior market analyst at OANDA, comments:
A rebound of this magnitude for gold after the inflation report was odd to say the least. Gold moving down again today is more in line with what we’ve learned from the data.
“We need to see this for a recovery under it”
Ole Hansen, head of commodities strategy at Saxo Bank, says it’s definitely the higher-than-expected US CPI data that weighs the market down. He states that this triggered a surprisingly strong counter-reaction in both stocks and the dollar at the outset. In addition, the analyst makes the following statement:
In the near-term, to see a rebound in gold prices, we need to see a reversal in yields, especially in returns, which would then potentially lead to a reversal in the dollar.
“There is a chance for gold to rise higher in the medium term”
According to Stephen Innes, managing partner of SPI Asset Management, the gold price is stuck between whether or not to see a pivot anytime soon. But the analyst says there is a light at the end of the tunnel in the sense that the Fed can stop here. Based on this, the analyst makes the following comment:
In the medium term, gold has a chance to go higher than lower. We will see negative results in global economies. It is possible that this will turn the scales in favor of interest rate cuts.
“Gold price will go to $1,600 by the end of the year”
The yellow metal is traditionally regarded as a hedge against inflation and economic turmoil. However, interest rate hikes to contain rising prices reduced the attractiveness of bullion as it did not earn interest. ANZ analysts predict that gold prices will fall to $1,600 by the end of the year as monetary policy tightens aggressively and the dollar strengthens.
“It is possible for gold to press a new bottom with continued dollar strength”
cryptocoin.com As you follow from , gold is falling and is quite vulnerable. The chances of another super-high 75bps gain at the November FOMC meeting are set to help the US dollar, according to a report by TD Securities economists. Economists explain their views as follows:
There is disinflation everywhere except for the CPI data. There has been a sharp U-turn in risk sentiment following the hot inflation data… Conversely, the recovery in risk assets and precious metals could instead be a symptom of market illiquidity that cuts both ways. Gold prices still need to rise above $1,730 to extend the short squeeze. However, markets have already fully priced in a 75 basis point increase for the next FOMC meeting. For gold prices to hit a new low, the dollar will have to continue.
