The volatility in the gold market has increased in the last few days. Overall, however, market analysts say that the gold market is waiting for a catalyst to pull the precious metal out of the narrow trading range.
“Gold is between rising inflation and aggressive rate hikes”
Commodity Futures Trading Commission (CFTC) has released its report on the latest trade data. The data indicates that hedge funds remain relatively neutral on gold. It also shows that it is not taking a significant bullish or bearish position. Analysts say gold remains in a tug-of-war between rising inflation and aggressive rate hikes from the Fed.
“Inflation story likely to keep the golden bears away”
The Federal Reserve is on track to raise interest rates by 50 basis points this weekend. In addition, it is likely to make a similar move in July. However, inflation remains a major threat to the economy. As you can follow onKriptokoin.com , the US CPI increased by 8.6% in May, reaching the highest level in 40 years. On the subject, Marc Chandler, Managing Director of Bannockburn Global Forex, comments:
The Fed and BOE are likely to raise interest rates. In addition, it is reasonable to expect the macro picture with the hawkish return from the ECB to weigh on the bottom. But the inflation story is likely to keep the golden bears away.
Gold’s net position increased
CFTC released its Commitments of Traders report for the week ended June 7th. The report showed that money managers increased their speculative gross long positions on Comex gold futures to 115,215 with 2,484 contracts. At the same time, short positions fell by 4,254 contracts to 57,684.
Gold’s net position now stands at 57,531 contracts, up 13% from the previous week. During the survey period, gold prices traded in a tight range of $1,850 on both sides.
TDS: The yellow metal will eventually succumb
Analysts at TD Securities see gold prices likely to push lower as there are still plenty of ‘comfy longs’ in the market . Analysts have warned that gold could possibly retest support around $1,800. Analysts gave the following in their assessments:
The net position in the gold market remains quite sticky with added positions and modest shorts.
Analysts state that the Fed’s next moves are well indoctrinated. The group of discretionary traders, which has become more prominent since the pandemic period, is unwilling to be shaken by the unknown post-September Fed amid growing recession concerns, according to analysts. In this context, analysts say:
This dynamic shows that gold prices are holding steady against a strong dollar and rising rates. We think the yellow metal will eventually succumb to the Fed’s fight against inflation.
Optimistic about gold
Although the precious metal is showing a bearish trend, many analysts are optimistic that gold is likely to rise in the long run. There is growing doubt that the Federal Reserve can contain inflation.
Saxo Bank’s Head of Commodity Strategy Ole Hansen says it will support the bottom of rising stagflation fears. He also notes that further weakness in the equity markets will continue to support gold prices. The analyst explains:
Gold was relatively unchanged on a year-on-year basis. But it continues to outperform stocks. So I am satisfied with its performance. The Federal Reserve is running out of time if it wants to contain inflation. I don’t think they want to risk putting the economy in a recession.
