Gold prices fell as the dollar rose on Tuesday. Also, expectations that US interest rates will rise for a longer period of time also dampened the temptation of non-yielding bullion. Analysts interpret the market and share their forecasts.
“This will encourage the golden bulls to enter the war again”
Spot gold hit a one-month low of $1,719.56 in the previous session. The yellow metal later recovered slightly to close above $1,730 for the day. However, at the time of writing, it was trading at $1,725, down 0.65%. U.S. gold futures fell 0.7% to $1,737.
Meanwhile, the dollar index (DXY) rallied above its two-year high on Monday. SPI Asset Management managing partner Stephen Innes says gold will continue to be driven by dollar sentiment in the short term. In this context, the analyst makes the following assessment:
The market is in a ‘wait and see’ mode to see how the economic data works out. If the situation starts to deteriorate in the US, I think it will encourage the gold bulls to enter the war again.
Holdings and technical levels in SPDR Gold Trust
At the Jackson Hole central banking conference, the US Federal Reserve and the European Central Bank pledged to make every effort to tame stubbornly high inflation even if growth takes a hit. Thus, they consolidated their hawk stance.
Gold is considered a safe bet during economic uncertainty. However, increases in interest rates increase the opportunity cost of holding bullion. Markets are now largely pricing in a 75 basis point rate hike at the Fed’s September meeting.
Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, are an indicator of investor sentiment. Holdings fell 0.4% to 980.61 tons on Monday. Spot gold is likely to retest the resistance at $1,742, according to Reuters technical analyst Wang Tao. The analyst says that a break above this will likely lead to an increase in the $1,748-1,755 range.
“Gold, then it will start to rise”
Commenting on the markets, senior market strategist at RJO Futures, Bob Haberkorn, commented:
After Powell’s speech, the gold was sold. The current increase is entirely due to the dollar pullback as well as the bargain hunting. Gold will soon start trading in a small range, pending hints from the Fed. The US is entering recession. Then the Fed cannot be aggressive. Gold will start to rise as the market gets more confirmation on this.
Technical targets of golden bulls and bears
Meanwhile, Kitco Metals senior analyst Jim Wyckoff also comments on the developments in the markets. Wyckoff points out the following technical levels for yellow metal:
The bullish price target of the gold bulls is to form above solid resistance at $1,800. The bears’ short-term bearish price target is to push futures prices below solid technical support at $1,700.
“These are essential for gold to stabilize in the near term”
Meanwhile, Goldman Sachs lowered its UK growth forecast. It also expects the Recession to begin within the year. Gold futures fell a penny on Monday, and modest weakness in the US dollar helped limit losses in the precious metal’s dollar-denominated prices. In the Sevens Report Research bulletin, analysts make the following assessment:
For gold to stabilize in the near term, we will need to see both the dollar and yields stabilize and stop the rise. Because otherwise, these two upsides will definitely bring gold prices down to the critical support at $1,680.
“It is possible that the yellow metal is fragile here”
cryptocoin.com As you follow, monthly data on US employment will be released on Friday. OANDA’s senior market strategist, Edward Moya, says Treasury rates could gain further momentum next week if the labor market remains healthy. He also warns that gold can be fragile here because of this.
“This situation means a rise for gold prices”
Chintan Karnani, research director of Insignia Consultants, interprets employment data. In this context, the analyst makes the following statement:
A lower US August nonfarm payroll with headline numbers of around 125,000 means gold prices are on the rise. It also means a drop for DXY and bond yields. This number shows that interest rate increases are cooling the US economy. Therefore, a pause of 50 basis points in September and a pause in November opens up.
