Gold prices continue to trade at three-month lows without attracting investor attention, even as inflation pressures remain high.
“Gold may continue to face strong headwinds”
Gold is struggling as many commodity analysts face significant bullish momentum in the US dollar, which continues to trade near 20-year highs says he does. As Kriptokoin.com , the US dollar index peaked at 104,856 points on the day, while June gold futures were last traded at $1,816, down 0.45% on a daily basis.
Gold may continue to face strong headwinds as some currency analysts don’t expect the trend in the US dollar to change, at least before summer. Bipan Rai, head of North American FX strategy at CIBC Capital Markets, says several factors are aligned to support the US dollar over the next few months, explaining:
USD will likely remain on solid ground in the coming months. The main reason for this is that there has been no decline in the way long-term interest rates move, and the macro liquidity picture continues to point to a ‘risk-free’ ground.
According to Bipan Rai, the Fed is already quite hawkish and the USD will find support against other currencies to which policy settings are slower to adapt or completely different.
Bipan Rai: Dollar may not maintain its momentum in the long run
However, Bipan Rai thinks that the US dollar cannot sustain its current momentum in the long run. To bring the subject up, the analyst makes the following assessment:
We still anticipate that markets will reassess where the final interest rate for the Fed is priced in, which could leave the USD somewhat defensive as other majors catch up.
The only thing that can slow the US dollar down…
Looking to the future, currency analysts at Capital Economics predicted that the US dollar index (DXY) expects it to rise to 108 in the coming months, representing a 3% gain from current levels. Analysts note that the Federal Reserve’s aggressive monetary policy plan not only supports the US dollar, but also provides a solid buying momentum to the dollar with the increasing risk of global economic slowdown. For the dollar, analysts forecast:
Even after twelve months of gains, we estimate the underlying ‘fair value’ of the US dollar is only slightly above. We also think that the balance of risks is strongly skewed in favor of the dollar. It shows that if the global economy slows even more than our already negative projections, the dollar will likely rise higher as safe-haven demand rises, even as the Fed loosens its tightening cycle.
Capital Economics says the only thing that can slow the US dollar down is a recovery in the global economy and an improvement in the balance between growth and inflation. However, analysts say, “This does not seem like a realistic expectation until 2023 at the earliest.”
“This may prevent heavy selling in the gold market”
Although the US dollar creates a challenging environment for gold, commodity analysts are still invaluable. not ready to give up on metal. Many analysts state that gold continues to do quite well compared to other assets. Gold remained relatively unchanged for the year, while the S&P 500 fell roughly 17%. In a note released Thursday, Metals Focus analysts assess
Several factors that justify holding gold for many mainstream investors will limit the scale of exits in the coming months. Even following recent sales, equity valuations are still high by historical standards. All these factors should encourage institutional investors to hedge their current gold positions as a hedge against uncertainties. This can prevent an intense sale in the gold market.
