The stronger dollar and the expectation of further rate hikes by the Fed weakened bullion’s appeal. Gold prices fell to a three-week low on Friday. Also, the yellow metal is set for its first weekly drop in five weeks. Analysts interpret the developments in the market and share their forecasts.
Brian Lan: Strong dollar puts pressure on gold
Spot gold was down 0.64% at $1,7547.14 at the time of writing. So far, gold bullion has lost about 2.7% weekly. U.S. gold futures slid 0.51% to $1,762.2 dollars. Brian Lan of GoldSilver Central comments:
Markets expect interest rates to rise further. It is certain that the strong dollar is putting pressure on gold prices right now. Many are staying on the sidelines, waiting for gold prices to drop further. We’ve also seen quite a few liquidations on the ETF (exchange-traded fund) side.
Wang Tao: Gold price could drop to $1,744
cryptocoin.com As you follow, the dollar has reached a one-month high against its rivals. Thus, it made gold more expensive for buyers with other currencies. Meanwhile, several Fed officials said on Thursday that the Fed must continue to raise borrowing costs to contain high inflation. st. Louis Fed President James Bullard said he was inclined to support a 75 basis point rate hike in September.
Gold is highly sensitive to rising US interest rates. This is because rising interest rates increase the opportunity cost of holding non-yielding bullion. In July FOMC minutes released Wednesday, Fed officials said the pace of future rate hikes will depend on incoming economic data. Also, the number of Americans filing new applications for unemployment benefits fell last week, according to data released Thursday. This indicates that labor market conditions are tight. Reuters analyst Wang Tao looks at gold from the technical side. According to the analyst, a drop to $1,744 is possible as spot gold breaks the support at $1,759.
Daniel Ghali: It’s possible that this could trigger bullion bullion
Investors continued to digest the FOMC minutes. The minutes showed that more rate hikes are on the way. But it also signaled that Fed officials are beginning to more openly acknowledge the risk of going too far and curbing economic activity.
Daniel Ghali, commodity strategist at TD Securities, says low US Treasury yields could trigger a marginal rise in bullion. According to Ghali, the rate hikes have been heavily priced in. However, the strategist also underlines the following:
However, it is possible that the Fed will back down at the upcoming Jackson Hole Symposium against the idea that the cycle of rate hikes may end, saying it is “too early to declare victory over inflation”.
Carsten Menke: Gold likely to fall in the medium to long term
The dollar hit a three-week high. This has made gold priced in the currency more expensive for offshore buyers. Carsten Menke, head of Julius Baer Next Generation Research, says that if we assume the Fed will fight inflation without putting the economy in a recession, safe-haven demand will decrease further. He also notes that this situation will cause gold to decline gradually in the medium to long term.
Jeff Wright: FOMC minutes are pretty neutral
Jeff Wright, chief investment officer at Wolfpack Capital, says gold prices fell after the weekly drop in US jobless claims and data showing the strength of the US dollar. Wright, in a statement, made the following statement:
The FOMC minutes are fairly neutral rather than potentially hawkish. For now, a 50 basis point increase is certain, but a 75 basis point increase is quite possible. The FOMC used a language to ‘return to data dependency in September’. That alone contributed to US dollar gains.
Andrew Schrage: We may see more downward pressure for gold
The minutes of the meeting show that the Fed is planning additional rate hikes in the coming months. On the subject, Andrew Schrage, CEO of Money Crashers, said:
However, he also notes that walking pace will likely slow down. It also shows that we are closer to the end of the gait cycle than to the beginning. The downward move in gold prices in the hours following the FOMC is a sign that gold markets are recalibrating for a lower inflation environment. As a result, we may see more downward price pressure.
“It is possible for gold to fall to $ 1,700”
Gold futures suffered significant losses. It settled below the key psychological level of $1,800 for four sessions in a row. According to Jeff Wright, it is possible that a move away from the 75 basis point rate hikes and the cessation of quantitative tightening will push gold above $1,800. On the other hand, Wright’s opinion is in the opposite direction of this situation. The analyst makes the following prediction:
However, I think there is a negative perception for gold. Currently, prices may be at the upper end of their range. Therefore, it is possible for gold to drop to $ 1,700.
