The pause in the rally of the dollar and Treasury rates provided some relief for gold. Gold prices rose from a four-week low on Tuesday. But rising bets on the Federal Reserve’s aggressive monetary policy tightening capped gains.
Stephen Innes: Therefore, gains will be limited for gold
Spot gold dropped to $1,810.90 at the start of the session, its lowest level since May 19th. The yellow metal later rebounded and was up 0.45% at 1,827.41 at the time of writing. U.S. gold futures fell 0.13% to $1,829.4. Stephen Innes, managing partner of SPI Asset Management, comments:
Gold has received some support from front-loaded gains with earlier rate cuts along the curve. But no one wants to be short on dollars on the way to the Fed meeting. Therefore, earnings will be limited for gold.
“Therefore, gold faced selling pressure”
City Index senior market analyst Matt Simpson, on the developments in the markets. He interprets it as follows:
Investors prefer to go cash to participate in margin calls in other markets. In addition, he decides to empty his bottom. Therefore, gold faced selling pressure.
According to the analyst, it is possible that an increase of 75 basis points would later regain its status as an inflationary hedge. However, he added that gold could come under more pressure.
Wang Tao: Gold likely to end its bounce
Late Monday, the Fed expects a 75bps increase on Wednesday, according to CME’s Fedwatch Tool increased from 30% to 96% earlier in the day. A 75 basis point increase would be the largest since 1994.
Higher short-term US interest rates and bond yields increase the opportunity cost of holding non-interest-bearing bullion. Spot gold is likely to end its bounce around the $1,832 resistance, according to Reuters technical analyst Wang Tao. The analyst then says that gold is likely to continue its decline towards $1,808.
“Rising interest rates and rising yields are headwinds for gold”
BullionVault research director Adrian Ash, in a statement commented. Ash commented:
Rising interest rates and higher yields are creating a serious upside for the yellow metal in the short term. Because the precious metal does not bring any income. In such a sweeping financial slump, it’s rare for gold to fail to see a short-term sell-off at some stage.
Adrian Ash now asks when gold’s lure as a crisis protection tool will reassert itself. The analyst also states that the following is important:
The market is insured against stagflation, today’s worsening geopolitical tensions and a sudden bear market in risk assets. When will gold attract new long-term flows from more investors in this environment?
“Yellow metal will find support in the escape to safety, but…”
Kryptokoin.com As a result, the US dollar strengthened on Monday. Meanwhile, global stocks continued to decline. These, in turn, put pressure on gold prices in dollar terms. Treasury rates were also on the rise. Therefore, the opportunity cost of holding non-returnable assets such as gold has increased. ActivTrades analyst Ricardo Evangelista comments:
Some analysts say this Wednesday’s rate decision will be a 75bps increase, rather than the previously expected 50bps. However, it is possible for the central bank to increase its summer action from two to three. Against such a background, investors are abandoning riskier assets. Therefore, gold will find support from escaping to safety. But such gains will be limited by increases in stronger dollar and treasury yields.
