With a stronger dollar and interest rate hikes from major central banks, the appeal of the safe-haven metal has waned. The safe-haven metal, gold, fell 1% on Friday, closing the week lower. Analysts are trying to determine the next direction of gold.
Bob Haberkorn: Gold caught between inflation and interest rates
Bob Haberkorn, senior market strategist at RJO Futures, commented on the market. The strategist says that gold gave up some of its gains after the big jump on Thursday as the dollar rose 1.1%. A stronger dollar hurts gold as it makes the metal expensive for offshore buyers.
But Haberkorn adds that he is “stuck in the middle of a conflict between inflation and interest rates.”
JP Morgan: Rate hikes limit gold prices
The Federal Reserve announced its biggest rate hike since 1994 this week. In addition, the Swiss National Bank raised the policy rate for the first time in 15 years. The Bank of England followed suit. In a note, JP Morgan underlines:
Stronger inflation initially showed an upward trend for precious metal prices. Now there has been a policy rate response from the Fed and other central banks. It quickly becomes ineffective with more aggressive pricing for it. This probably keeps prices limited.
Ole Hansen: These support gold’s safe-haven appeal
Higher interest rates drove bond yields higher. It also increased the opportunity cost of holding non-interest-bearing bullion. For this, the attractiveness of gold, which has traditionally been a hedge against inflation, is waning.
But Saxo Bank analyst Ole Hansen takes a different look, in a note. The analyst says gold’s safe-haven appeal is fueled by rising risks of stagflation, decades of high inflation and turbulence in risky assets. Therefore, the analyst adds, “gold has not fallen at the rate dictated by rising real interest rates.”
Lukman Otunuga: It’s been a rollercoaster week for yellow metal
Speaking to FXTM market analysis manager Lukman Otunuga, he commented on gold and the dollar. The analyst evaluates the relationship between the two as follows:
It’s been a rollercoaster week for gold, thanks to the shifting dollar and swinging Treasury rates. Gold saw a weekly drop as investors assess the effects of rising interest rates on global growth.
“Gold seeks new catalyst to break out of current range”
As you follow on Kriptokoin.com , the Fed increased interest rates by 75 basis points this week. He sees this as likely to limit gold’s upside gains in the near-term. However, he speaks of growing fears of a recession in the US amid tighter monetary policy. And he says these fears are likely to stimulate the appetite for safe-haven gold and essentially limit downside losses. For now, Otunuga draws attention to the following levels from a technical standpoint:
It bounced back into a mixed range with support near $1,800 and resistance at $1,880. The yellow metal may be looking for a new directional catalyst to break out of the current range.
Gold price technical analysis
The precious metal revived a bit in the middle of this week. Market analyst Rajan Dhall states that gold once again rejects any downside move below $1,800. The analyst takes a closer look at the Fed’s impact on gold. And he says markets clearly feel the need for a safe-haven asset. The analyst points to the following levels from a technical point of view:
There is a consolidation higher at $1,879.45 that buyers need to break to add momentum to this uptrend. Beyond this, the next resistance is in the green shaded area near $1,920. On the downside, a break of the previous wave at $1,805 is possible.
The analyst says this latest rise is just a pullback. He also notes that it means the underlying bearish trend from March 2022 is still valid. According to the analyst, there is trendline support and another key level that the bears need to break. Rajan Dhall continues his analysis:
The red shaded region represents a very tight price area. This has been tested many times at $1,780. For now, the price is stuck between a rock and a hard place. Therefore, breaking any of the above-mentioned levels will give us clues about the future path of the yellow metal.
