Investors are gearing up for clues about the pace of rate hikes by major central banks this month. Gold rallied on Tuesday, aided by the dollar’s pullback in this environment. However, he was unable to sustain that on Wednesday.
David Meger: This is the logic that has put pressure on the gold price lately
Spot gold was trading at $1,709.56 an ounce, down 0.12% at press time. U.S. gold futures fell 0.18% to $1,707.7. David Meger, director of metal trading at High Ridge Futures, assesses the market as follows:
The dollar pullback eases some of the pressure we’re seeing on the commodity complex and gold. Global central banks around the world began raising interest rates to curb inflation. Also, investors prefer other asset classes. These, in turn, cause headwinds for interest-free gold. This is the logic that has been pressing gold lately.
Yellow metal cannot move between opposing forces
cryptocoin.com As you follow, in recent weeks, bullion has not been able to reach safe-haven status despite recession concerns. Gold bullion has dropped more than $350 from the $2,000 it saw in early March. In this situation, the Fed’s aggressive rate hike plans and the recent rally of the dollar played a major role.
Markets expect the Fed to raise interest rates by 75 basis points at its meeting on July 26-27. Meanwhile, ECB policymakers will discuss whether to raise interest rates by 25 or 50 percentage points at Thursday’s meeting, according to Reuters. Senior analyst Jim Wyckoff highlighted the following in his note on Tuesday:
There was a big drop in the US dollar index this week. This limits sales interest in precious metals. However, rising US Treasury yields and a shaky crude oil market are putting the bulls down this week.
Michael Cuggino predicts gold price will rise further
Michael Cuggino, president and portfolio manager of Permanent Portfolio Family of Funds, gave a statement. Cuggino says the recent move towards the euro-dollar pair is a “short-term upside head for gold.” Also, according to Cuggino, this is primarily due to the desire to hold US assets in general, given the current global macro uncertainties.
Meanwhile, Cuggino also evaluates the Federal Reserve’s hawkish comments and actions to combat inflation. The Fed is more aggressive than its European counterparts, who are hesitant to raise rates at the same pace, according to the analyst. Because the ECB fears a wider and deeper recession than could happen in the US. Also, Cuggino comments:
We believe this is a short-term situation. As the ECB begins to raise interest rates in line with the Fed, we expect gold to rise further, possibly as the dollar weakens. The ECB will hold its next policy meeting on Thursday. Investors are also likely to start focusing on gold’s alternative currency and capital protection features, rather than an interest rate story again.
