The Federal Reserve’s aggressive stance continues to dampen the precious metal’s shine. Gold prices fell more than 2% on Thursday. Additionally, the decline continued on Friday and the yellow metal dropped to $1,780 levels.
“Yellow metal fails to benefit from risk aversion once again”
Gold prices are on a downward path on a monthly, quarterly and yearly basis. City Index market analyst Fawad Razaqzada comments:
Expectations of a strong US dollar and rising interest rates continue to weigh on gold. The yellow metal is once again failing to benefit from the continued risk aversion in the markets.
“Gold is a belated response to central banks’ decisions”
Also, a precious metals analyst says the gold price drop this week is a belated response to the increasing hawkishness of the Federal Reserve and other central banks. Bart Melek, head of global commodity strategy at TD Securities, comments on the developments as follows:
What we’re seeing here is a somewhat belated response to the hawkishness we’ve seen from the US central bank and other central banks around the world. Jerome Powell hangs out with his European colleagues and the discussion du jour is inflation and what to do with it.
Bart Melek: Gold will continue to weaken
Expectation of higher interest rates reduced demand for gold. Because higher interest rates make bonds a more attractive investment, as gold does not yield returns. Fed chairman Jerome Powell spoke during a panel discussion during the ECB’s summer policy conference in Sintra, Portugal. Powell said there is no “guarantee” that the Fed will be able to push inflation back to its 2% target without crashing the strong American labor market.
Bart Melek notes that algorithmic traders such as commodity trading advisors have also increased their bets against the yellow metal. Based on this, he says that gold will continue to weaken. According to the analyst, the next level of technical support for gold was at $1,795. On the other hand, this support was broken at press time and gold fell to $1,787.
“Traders will help prevent gold from falling off the cliff”
Meanwhile, the US Fed’s preferred measure of inflation data, PCE, slowed slightly to 4.7%. cryptocoin.com As you follow, the headline figure remained unchanged at 6.3%. Consumer spending rose just 0.2% last month, a smaller increase than economists surveyed by FactSet had expected. Meanwhile, US weekly jobless claims data have been released. The data showed that the number of Americans applying for unemployment benefits for the first time decreased by 2,000 last week. Naeem Aslam, chief market analyst at AvaTrade, makes the following prediction:
Traders looking to hedge their risks in an extremely uncertain environment will help prevent the gold price from “falling off the cliff”. So, gold will remain volatile after the latest US data.
