Gold prices rose on Thursday, supported by a pullback in the dollar. Investors await the Fed’s direction on interest rates from a key central bankers meeting in Jackson Hole. Analysts interpret the market and share their forecasts.
“Monetary policy will be the key factor for gold prices in the short term”
Investors in financial markets are poised for the Fed to reiterate its commitment to taming inflation or signal a “return” for lower rate hikes. Powell will address the annual global central banking conference in Jackson Hole on Friday. Brian Lan at Singapore-based GoldSilver Central comments:
Will the Fed continue to aggressively increase interest rates and impact the economy? Or will this remain in the background for now? People want to be clear about this.
Brian Lan adds that monetary policy will be the key factor for the gold market in the short term, as high interest rates affect consumer behavior.
“Gold is possible to rise to $1,765 to $1,774 range”
Rate hikes increase the opportunity cost of holding non-interest-paying bullion and push the dollar higher. The Fed has increased its benchmark overnight rate by a total of 225 basis points since March to combat high inflation. The Fed also noted that further tightening will depend on economic data.
On the technical front, spot gold is likely to rise to the $1,765 to $1,774 range by breaking the $1,756 resistance, according to Reuters technical analyst Wang Tao.
“Traders are waiting to see what comes out of Jackson Hole”
cryptocoin.com As you follow, the dollar helped gold reverse some of the initial declines. DXY stopped at 108.6 after climbing as high as 109.112 at the start of the session. A stronger dollar tends to blunt gold appetites among offshore buyers. Bob Haberkorn, senior market strategist at RJO Futures, comments on the market as follows:
The market is relatively calm. Metal traders are waiting to see what comes out of the Jackson Hole meeting. Traders want to learn more about the Fed’s rate hike path.
“The direction for gold prices depends on what Powell has to say”
In a note, OANDA senior market analyst Craig Erlam highlights the following points about the direction of the market:
Whether gold will break $1,730 depends on what Powell has to say and whether traders are in the mood to listen. Will Powell stick to his colleagues’ hawk scenario?
“Gold prices show interesting signs of recovery”
Investors are also awaiting US second-quarter gross domestic product forecasts. In addition, it will track consumer spending data for July, which will be released later this week. Precious metals analysts blame the recovery in the US dollar and long-term Treasury rates for gold’s weakness last week. But despite continued strength in both the dollar and interest rates, gold is finally stabilizing, says Rupert Rowling, precious metals analyst at Kinesis Money. In a note to clients Wednesday, Rowling comments:
The brilliant performance of the dollar continues. Also, 10-year Treasuries are still over 3%. Despite this, gold prices are showing signs of an interesting recovery, or at least some stabilization.
How will the market react to the dove or hawk Powell?
In a market update, Exinity Group chief market analyst Han Tan comments on the developments as follows:
If Powell’s comment forces markets to price higher on larger Fed rate hikes, it’s possible that it could trigger further declines for stocks and gold. In this case, the king dollar will continue to dominate the currency universe. If Powell turns out to be more dovish than anticipated, this is likely to reinvent the narrative that would potentially allow risk assets to continue their summer rally.
