The sharp rise in the dollar and rising interest rates dampened the appetite for the non-yielding yellow metal. Against this backdrop, gold tumbled more than 2% on Tuesday. Analysts interpret the developments in the market and share their forecasts.
“There are more attractive alternatives to gold in a rising interest rate environment”
Spot gold was down 0.17% at $1,761.47 at press time. U.S. gold futures fell 0.20% to $1,760. The dollar’s rise has made the safe-haven metal less attractive to offshore buyers. Also, DXY reached its highest level in nearly two decades. The dollar has solidified its preferred haven for investors worried about a potential recession.
Chris Gaffney, head of world markets at TIAA Bank, says there are more attractive alternatives to gold in a rising interest rate environment. The shiny metal is considered a hedge against inflation. But to quell rising price pressures, higher interest rates reduce the appetite for non-interest-paying bullion.
“Gold’s short-term techniques are completely bearish”
Kitco Metals senior analyst Jim Wyckoff notes that short-term techniques for bullion are completely bearish. According to the analyst, this invites technical-based speculators to play the short sides of the futures markets. The analyst also comments:
Metals are feeling the pressure from a stronger US dollar index, which hit 20-year highs overnight.
“This data is likely to bring significant volatility for gold”
Investors are looking for new clues about the magnitude of possible rate hikes in the coming months. It awaits the minutes of today’s FOMC June meeting. AvaTrade chief market analyst Naeem Aslam blames the dollar’s movements for boosting gold’s price action. The analyst makes the following assessment in his market commentary:
Minutes of the FOMC June meeting will be released on Wednesday. On Friday, monthly data on US non-farm payrolls will arrive. These are the two most important events that are likely to bring significant volatility to the yellow metal price.
“Gold is a good long-term investment at current prices”
Chintan Karnani, research director of Insignia Consultants, says gold at current prices is a “good long-term investment.” However, he states that in the short term, traders should “wait and watch”.
cryptocoin.com As we have reported, US non-farm payrolls data will be released on Friday. Before this data, the analyst advises his clients to use the decreases in gold prices.
What developments are there on the physical gold front?
Meanwhile, Zimbabwe’s central bank has announced that it will start selling gold amid uncontrolled inflation. Moreover, India’s gold imports in June almost tripled compared to the same period of the previous year. These developments cause the prices in the physical market to be corrected.
