The gold price remains under pressure from the Federal Reserve, which maintains its hawkish outlook despite falling inflation. However, it remains unclear how long this situation will last. Economists and strategists of leading banks are trying to predict gold’s next route.
Commerzbank expects sideways trend for gold price
According to Commerzbank economists, the gold price will remain flat around $1,950. Today, attention will likely focus on the US ISM Purchasing Managers Index. The index has been following a downward trend since the spring of last year. Economists evaluate the status of the index and its impact on the gold price as follows:
If the index continues to stay in the contraction zone, this could significantly dampen the positive mood in the economy. Therefore, it can support the gold price. However, a set of disappointing economic indicators will likely be needed to trigger a sustained upward move. In the short term, we expect the gold price to follow a sideways course around $1,950.
If your gold exceeds this level, it goes to $2,070!
cryptocoin.com As you follow, gold oscillates in a limited range between $1,945 and $1,987. Bank of America (BofA) strategists analyze the technical outlook for gold. In this context, strategists come to the following conclusion:
If gold goes below $1,945, it will approach the $1,900 region again. The price action of gold in the period from May to July increasingly resembles a ‘head and shoulders’ base pattern. This pattern is typically a bullish reversal pattern that signals a potential transition from a downtrend to an uptrend. If Gold can rise above the $1,987 level in the next five trading sessions, it will strengthen the belief in the pattern. This would potentially signal a rise towards the $2,070 level. If gold dips below the $1,945 level, there is a risk that prices may slide lower to retest the lows or the 200-Day Simple Moving Average (SMA) hovering around $1,900.
Investors reduced long positions and increased shorts
The yellow metal made a U-turn in the second half of the week, falling towards $1,950. Economists at TD Securities point to the reality of higher-than-expected interest rate risk. Based on this, economists make the following comment:
As the dots suggest, fears that the US central bank might have to continue the tightening cycle convinced investors to cut their long positions and take new shorts once it became clear that a rate hike was finalized in July. At the same time, extreme increases in oil prices have raised concerns that the rate of deterioration in the CPI may no longer be relevant for the remainder of this year.
TDS: Gold price will remain under pressure!
Economists also point to rising energy and grain prices after Russia closed shipping routes. They state that this implies that higher-than-expected interest rate risk is real at a time when the economy continues to surprise upside. Accordingly, economists come to the following conclusion:
This mentality and Jerome Powell’s messages that monetary policy will depend on the data recently drove gold as low as technical support around $1,950. Data continues to be strong. Also, other central banks continue to tighten. Therefore, the gold price will remain under pressure. However, only a significant weakening in economic conditions will be the catalyst for a significant upturn.
