The dollar gained strength on anticipation of steep rate hikes by the US Federal Reserve. The price of gold fell against the general strength of the dollar on Friday. Thus, the yellow metal recorded its fifth consecutive weekly loss.
Jim Wyckoff: Gold price suppressed by very strong dollar
Spot gold closed the week at $1,707.35, down 0.17% on Friday. The precious metal fell about 2.2% on a weekly basis. U.S. gold futures, on the other hand, were down 0.13% to trade at $1,703.6. Kitco Metals senior analyst Jim Wyckoff comments:
Prices were suppressed by a very strong dollar. The market went from worrying about inflation to worrying about recession. This has resulted in lower demand for metals, including gold.
TDS: Gold bugs falling like a domino
cryptocoin.com As you watch on , the dollar slackened, but managed to hold near its twenty-year high. This undermined the attractiveness of gold among offshore investors. It also swept away safe-haven flows amid fears of slowdown. In a note, TD Securities highlights:
With the gold beetles falling like dominoes, prices are now challenging pre-pandemic levels. It raises the risk that the largest speculative group underneath will start to feel the pain under a hawkish Fed regime.
“Yellow metal continues to be more bearish”
According to TD Securities strategists, huge traders seem apathetic. However, average traders still hold almost twice the expected position size. From this point of view, strategists make the following comment:
Now, pressure is mounting for a capitulation as prices begin to challenge pandemic-era entry levels. In a liquidation vacuum, these large positions are the most vulnerable. This indicates that the yellow metal continues to be more bearish.
Impact of economic and geopolitical risks on gold price
Meanwhile, US retail sales rebounded strongly in June as Americans spent more amid rising inflation. It’s possible that this, too, could allay fears of an imminent recession. However, it does not change his view that the growth in the second quarter was lukewarm.
In addition, the EU is considering the seventh package of sanctions that will ban Russia’s gold imports. Investors are also following the EU’s potential plan to accept this package. Jim Wycoff has this to say on the subject:
EU sanctions will not have a big impact on supply and demand, as Russia may sell its gold to other countries. The tradability of gold is quite high.
Jeffrey Halley: Gold still looks fragile
Commenting on the market, OANDA senior analyst Jeffrey Halley says gold is fading against a stronger US dollar this week. In this context, the analyst makes the following assessments:
However, it seems to be trying to establish a temporary base ahead of $1,700. However, it shows no signs of meaningful upside momentum with limited rallies to the $1,750 region. In the larger technical picture, gold still looks fragile while risks are on the downside.
ANZ Research: Gold price will remain under pressure from Fed
Two of the Federal Reserve’s most hawkish policymakers said on Thursday they support another 75 basis point hike at the central bank’s policy meeting this month. Higher interest rates and bond yields increase the opportunity cost of holding non-yielding bullion. ANZ Research shares this insight:
Investment demand for gold is weakening. Gold price will remain under pressure from Fed’s big rate hike expectations.
Commerzbank economists expect recovery in yellow metal
The strong US dollar, which is a mirror to the weak euro, is suppressing the gold price. However, Commerzbank economists expect the yellow metal to recover in the coming months. Economists make the following assessment:
High interest rates are bad news for gold as an interest-free investment in itself, if the ECB meeting reveals that a more determined approach to fighting inflation will be adopted. However, it is possible for gold to profit indirectly.
Is a higher gold price possible?
According to economists, market participants are increasingly expecting a recession in the US. Therefore, it is possible for gold to really take advantage of this as a safe haven. In this context, economists make the following statement:
This is one reason why we anticipate higher gold prices in the coming months and quarters. However, strong ETF outflows still need to come to an end for this to happen. Also, buying interest needs to return to the market.
