US Federal Reserve officials have signaled further rate hikes as the Fed tries to curb inflation. After that, the gold price took a step back from its strong rally. Thus, it closed Friday and the week with a decline. Analysts interpret the market and share their forecasts.
“The decline is likely to continue next week”
Spot gold closed Friday at $1,749.67 $8.84, down 0.6%. Thus, it lost 1.2%, its biggest weekly drop since mid-October. U.S. gold futures were last traded at $1,754.4, down 0.5%. David Meger, head of precious metals trading at High Ridge Future, says gold’s slight pullback after the last rally is due to a technical pullback in the gold market.
Also, according to Meger, it is possible that the downturn will continue until the December option expires next week. The analyst also states that this may cause further consolidation below. He adds that the market generally seems focused on interest rate expectations from the Fed.
“A correction for the gold price was always possible”
Gold has lost 15% since the March peak after the Fed began tightening its monetary policy. However, it has gained about 7% since early November as markets began pricing in slower rate hikes. Markets are currently giving an 87% chance of a 50bps increase at the Fed’s December meeting. City Index market analyst Fawad Razaqzada comments:
Gold has been doing relatively well so far. However, after its massive rise, a correction was always possible.
“The gold market is weighing two different things right now”
Boston Fed President Susan Collins said on Friday that more rate hikes are ahead of the central bank as it tries to curb inflation. He also added that a 75 basis point increase is still on the table. The dollar index (DXY) then stabilized, making gold more expensive for other currency holders. Also, benchmark US Treasury yields rose slightly.
OANDA senior market analyst Craig Erlam says the gold market is weighing two different things right now. On the one hand, US economic data pointing to lower inflation provides room for the Fed to slow tightening, according to the analyst. On the other hand, there is a cautious Fed that does not want to change the tone of its messages based on any economic data.
“Gold price will likely remain volatile”
Bullion is considered an inflation hedge. However, higher interest rates increase the opportunity cost of holding bullion. Analysts say institutional investors are cautious and it will be difficult for gold to gain more. Jigar Trivedi, an analyst at Mumbai-based Reliance Securities, notes that gold will likely remain volatile until a clear instruction from the Fed.
“Gold price will remain under pressure until Q1 of 2023”
cryptocoin.com As you can follow, gold declined with the strengthening USD. ANZ Bank strategists expect the yellow metal to remain under pressure until the first quarter of next year. In this context, strategists make the following statement:
Gold regains support from weakening US Dollar. However, rising real interest rates in the US continue to be a major headwind for non-yielding gold. Inflation is still well above the Fed’s 2% target range. Hence, the direction of the USD may reverse with a hawkish interpretation of the central bank. Therefore, we expect gold prices to remain under pressure until the first quarter of 2023.
“Another short closing leg is expected under it”
Gold finished in the red for the first time in three weeks. Strategists at TD Securities await another short closing leg in yellow metal. From this point of view, strategists make the following assessment:
Another shorting leg is expected in the gold markets as current prices support another CTA buying program. The scale of the expected flow of purchases at current prices is marginal. However, this suggests that the risks of positioning for the yellow metal with a low margin of safety are still on the upside, before price action catalyzes the subsequent buying flow of the largest group of money managers who trade gold. However, the next major buyout is just north of $1,815.
