Gold posted its biggest one-day percentage gain since March on Thursday. However, gold prices were adjusted for a fourth straight monthly decline on Friday amid strong performances in dollar and US bond yields and the pressure from top central banks’ aggressive monetary policies.
“Gold has no story of its own!”
Spot gold was up 0.33% at $1,761.57 at press time. U.S. gold futures rose 0.38% to $1,775.6. OANDA senior analyst Jeffrey Halley says gold doesn’t have a story of its own. Rather, he notes that it continues to be inversely proportional to the dollar and interest rates. However, he adds that the recent declines in the dollar and interest rates have given bullion some support this week.
The precious metal is up 1.9% on a weekly basis so far. That marks its best week since mid-May. That said, it’s unlikely that nugget will surpass its worst streak of monthly losses since November 2020.
Jeffrey Halley: Gold trying to bottom out
cryptocoin.com As you can follow, the dollar spent most of July at 20-year highs. Therefore, it has increased the demand for dollar-priced gold among other currency holders. Meanwhile, the Fed raised interest rates by 75 basis points on Wednesday, in line with expectations. Jeffrey Halley comments:
Although gold bullion saw a sell-off below $1,700 earlier this month, testing and holding the long-term support at $1,675/80 is important. Gold has been trying to bottom since then, aided by recent US recession signals.
Phillip Streible: Traders expect increased appetite for gold
The US economy unexpectedly contracted in the second quarter, raising the risks of an economic slowdown. This supported gold’s safe-haven appeal. Phillip Streible, chief market strategist at Blue Line Futures in Chicago, says traders expect the Fed to initiate rate hikes more slowly and increase appetite for gold after GDP data confirm recession fears.
After the Fed’s meeting on Wednesday, Jerome Powell said at his September meeting that an “unusually large” increase might be more appropriate. However, he also underlined that the decision will be determined by the economic data received up to this date.
“An opportunity for investors who want to diversify their portfolios”
Michael Matousek, chief trader of US Global Investors, says that inflation will not end with this increase by the Fed. He also notes that given the downtrend of gold, it is now at an attractive level. In this context, he states that it offers an opportunity for investors who want to diversify their portfolios.
Daniel Ghali: It is possible that this situation will benefit the bottom
Traders interpret Powell’s vague guidance as the Fed only opened the door to a 50 basis point rate hike in September. Daniel Ghali, director of commodity strategy at TD Securities, evaluates Powell’s statements as follows:
We can see that the Fed is starting to turn towards a slower rate of increase in interest rates. This could potentially benefit gold against US dollar and Treasury rates.
The shorting situation among money managers who recently shorted gold for the first time since 2019 has worsened, according to Ghali, who citing a combination of public position data and TD Securities’ internal metrics. “Money managers include gold. But underneath you have another group that has crossed over to the other side,” he says.
Brien Lundin: Gold in oversold territory
Commenting on the developments in the markets, Gold Newsletter editor Brien Lundin says:
Powell’s perceived lack of commitment to monetary tightening on Wednesday, along with today’s confirmation of a recession, has led investors to believe a pivot will come sooner than the previous consensus view. Gold is in the oversold zone. So for the price increase, all the materials fit neatly into place.
“A positive setup for gold”
Brien Lundin notes that economic growth has curtailed and the current situation is more difficult to resolve. He also says, “Not without significantly higher wages.” According to the analyst, this contributes both to a deeper and longer recession and to continued inflationary pressures that pose a huge dilemma for the Fed. From this point of view, the analyst shares the following predictions:
This also presents a positive setup for gold, especially at the current low price levels. Now, ‘metals are much more likely to bottom out. Even if we don’t see a strong rally, we are likely to at least see a slow rise from the lows forward.
