The dollar fell as US Treasury yields pulled back on Friday. Continuing economic risks supported the safe-haven appeal of non-returning bullion. In this environment, gold prices posted their first weekly gain in six weeks.
Phillip Streible: Fed meeting is a high volatility event for gold prices
Spot gold dropped to a one-year low of $1,680.25 on Thursday. However, it made a strong recovery from here and closed the week at $1,727. Thus, the yellow metal gained about 1% this week. U.S. gold futures, on the other hand, were last up 0.8% at $1,727.4.
Gold’s rise was helped by the pullback in US 10-year Treasury yields. At the same time, a competing safe-haven dollar index (DXY) has increased gold’s appeal to offshore buyers. Expectations for a 100 basis point rate hike by the Fed weakened after disappointing US data. That’s why DXY saw its first weekly drop in four weeks.
Phillip Streible, chief market strategist at Chicago Blue Line Futures, says the lower dollar, declining growth stocks and a drop in interest rates are helping to keep it going. However, Streible also notes that the Fed meeting is likely to be a “high volatility event” for gold. However, he adds that there may not be much steep increases after next week.
Suki Cooper: Long-term trend still bears down
Meanwhile, in physical markets, demand increased in some centers in Asia this week due to lower prices. Commenting on the markets, Standard Chartered analyst Suki Cooper comments in a note:
Assuming the Fed raises 75 basis points in July, we believe most of the short-term downside risk is priced in. However, the long-term trend is still down. However, if recession risks deepen, gold is likely to find support in a price-sensitive physical market.
Craig Erlam: Gold likely to continue on recent momentum
Yields have fallen, which could support the yellow metal in the short term, according to OANDA analyst Craig Erlam. The analyst explains his view as follows:
If we are moving towards the acceptance of low growth or recession, the need for the Fed to be as aggressive as it is currently priced in is likely to disappear. In this case, it is possible for gold to continue on the latest momentum.
Lukman Otunuga: This could provide an opportunity for gold to fight
The eurozone economy has suffered greatly from the impact of the war in Ukraine. Nevertheless cryptocoin.com As you follow, the ECB increased interest rates more than expected. Therefore, the ECB joined its global peers in the fight against rising inflation. Regarding the Fed’s move, FXTM senior market analyst Lukman Otunuga said:
If the Fed disappoints markets with a smaller rate hike, it’s likely to weaken the dollar. It’s possible that this too will give the gold some breathing room to fight back.
Edward Meir: This will be the downside for gold prices!
According to ED&F Man Capital Markets analyst Edward Meir, gold prices are in a downtrend. The analyst states that this is why the rallies that started are short-lived. Because, according to the analyst, gold prices are under pressure by the fact that inflationary expectations are falling. Meir shares these expectations:
We expect to hear how hawkish the Fed will be on interest rates. If they think inflation is still a problem, they will again go for more rate hikes. This will be very bearish for gold.
