A strong dollar and upcoming rate hikes dampen appetite for the unproductive yellow metal. With the effect of this, the gold price hung below the psychological support of $1,800 on Friday. However, he recovered later and closed the day on a positive note.
“The dollar is the biggest pressure factor for the gold price”
Spot gold price slumped as low as $1,785 with a hard break for the first time on Friday. However, it has bounced back above $1,800 with subsequent purchases. The precious metal closed the week at $1,810, up 0.2% on the day. U.S. gold futures slid 0.32% to $1,801.5. Chris Gaffney, head of world markets at TIAA Bank, comments:
The dollar is the biggest factor suppressing gold. In the bigger picture, there are rising interest rates.
Chris Gaffney: Retail customers tighten their belts
Investors also seem to prefer the safety of the dollar amid rising recession fears on Friday. Moreover, the currency’s gains are also making gold more expensive for offshore buyers. TIAA’s Chris Gaffney notes that some US retail customers are also ‘tightening their belts’ by questioning their growth prospects and general inflation.
Meanwhile, Eurozone inflation reached another record in June. This strengthened the possibility of rapid rate hikes by the ECB starting this month. The hawkish monetary policy of the biggest central banks has pushed interest-bearing gold into its worst quarter in more than a year.
“Basic import duty increase on gold immediately affects demand”
By the way cryptocoin.comAs we have also reported, India, the world’s second largest consumer of bullion, has increased its core import duty on gold from 7.5% to 12.5% in order to reduce its trade deficit.
Ajay Kedia, director of Kedia Commodities in Mumbai, says that while the third quarter generally sees strong physical buying between festivals, this will impact demand immediately. Physical gold sellers in India have made big discounts this week as demand remains weak and a tax hike has pushed interest rates even further.
“As the price of gold falls, this time buyers may come to the rescue late”
Commodities continue to weaken and there is concern over recession-prone markets. In this environment, several commodity analysts say that the technical outlook in the gold market indicates that the yellow metal will continue to slide.
Gold managed to gain support from buyers in the declines below $ 1,800 in the last six months. But “this time, buyers can come to the rescue later,” says FXPRO senior market analyst Alex Kuptsikevich. The analyst makes the following assessment:
The latest financial market dynamics show that the recession in the markets is due to the actions of the central banks.
Alex Kuptsikevich: Demand for gold is likely to decline in the coming weeks
Data on Friday shows that the US economy slowed in June. The ISM barometer of American factories fell 3.1 points to its lowest level of 53%. Alex Kuptsikevich comments:
Meanwhile, central banks are gaining momentum in tightening monetary policy. It also puts pressure on long-term inflation expectations. In such an environment, the demand for gold promises to decrease in the coming weeks as insurance against inflation.
