Despite rising recession risks, high interest rates nullify gold’s safe-haven appeal to some extent. As a result, gold prices are fluctuating slightly in range-bound transactions on Wednesday. Analysts interpret the latest developments in the market and share their forecasts.
“Gold is likely to find support from growing fears of a global recession”
Meanwhile, spot gold is trading at $1,825, up 0.30% at press time. US gold futures fell 0.03% to 1,820. Exinity chief market analyst Han Tan comments:
Increasingly hawkish rhetoric by major central banks is putting more downward pressure on zero-yield gold. Also, tides in risk sensitivity are injecting more volatility into spot gold prices. But it’s possible that bullion still finds some support from growing fears of a global recession.
Michael McCarthy: Gold prices are currently in a balance
US Federal Reserve Chairman Jerome Powell will speak at an ECB forum later in the day. Traders will watch for policy cues after the Fed’s aggressive rate hike earlier this month. Michael McCarthy, Head of Strategy for Tiger Brokers Australia, comments:
We have been stuck in this trading zone for several months. Overall, the outlook for interest rates means that once we make an exit from this region, a downside is more likely. Also, rising interest rates and a stronger US dollar are acting against inflation hedges. Therefore, we currently have a balance in the gold market.
Ole Hansen: Jury still out for gold prices
Analysts say gold is taking cues from the weaker mood in the broader commodity markets. He also noted that rising inflation had a negative impact on the demand outlook. Saxo Bank analyst Ole Hansen used the following statements:
Finally, it is possible for gold to benefit from economic concerns. However, the jury is still out there at the moment. Investor appetite among the markets is quite weak. Additionally, from an investment perspective, it’s been a bad year so far. Therefore, the current trade of gold continues to be in a very difficult market.
“The investment world is increasingly concerned”
cryptocoin.com As you’ve followed on, gold bullion is struggling to get out of range-bound trading. ACY Securities chief economist Clifford Bennett comments on the latest market situation as follows:
The investment world is increasingly concerned about the deterioration of the global economic climate. This led to serious leverage drops in many markets, including gold. However, as we saw in the example of black gold (oil), these sales can represent excellent long-term investment opportunities. And perhaps more importantly, a valuable safe-haven trade.
Why are gold prices continuing to decline?
Gold slumped to a low of $1,816 in nearly two weeks as the US dollar appreciated significantly. According to Commerzbank’s strategists, this trend will continue into Wednesday. Also, according to strategists, the continued strength of the dollar today is probably the reason why gold is going down even more. Strategists make the following assessment:
Weaker US economic data appears to be behind the solid dollar. Meanwhile, consumer confidence unexpectedly fell sharply in June. This is because some market participants’ expectations for rate hikes have dropped slightly. Because they assume that the Fed will not raise interest rates that fast despite the increasingly pessimistic economic outlook. This will somewhat reduce the risk of recession.
Meanwhile, ECB Christine Lagarde rejected the idea of raising interest rates by 50 basis points in July. Strategists interpret this development as follows:
Lagarde’s stance is another factor that could contribute to the strengthening of the dollar. That is, to say that a rate hike of this scale won’t happen until September.
