After three months of sharp declines, the gold market sees new upward momentum. The move comes as the US economy contracted for the second consecutive quarter. Professional analysts interpret the markets and share their forecasts.
Suki Cooper: Gold has risen in last seven recessions
Economists and politicians are equally divided on whether the US is in recession. The National Bureau of Economic Research (NBER) is the agency that will formally declare a recession that has come after months of research and debate. But the traditional definition describes it as an economy’s contraction for two consecutive quarters.
Contrary to what politicians and economists thought, consumers began to feel the effects of rising interest rates and persistently high inflation. Data this week showed consumer confidence in July fell to its lowest level since February 2021. Also, increasing pessimism is expected to weigh more on growth. At the same time, a Twitter poll this week showed that 80% of respondents think the US is in recession.
While we’ll leave the recession debate to politicians and economists, there’s no doubt that the US economy is slowing down. The Federal Reserve’s monetary policy is starting to bite. According to market analysts, this is good for gold. Standard Chartered precious metals analyst Suki Cooper says prices have risen an average of 15% year-on-year over the past seven recessions.
John Hathaway: Fed center could come by September
cryptocoin.com As you can follow on , the Fed increased interest rates by 75 basis points in the face of the slowing economy. At the same time, the Fed said further aggressive tightening would be warranted if data support it. However, what most investors focus on is a slight change in monetary policy. Powell also noted that tightening should slow down as the economy begins to feel the effects of rate hikes.
The market now sees the Fed approaching the end of its monetary policy cycle. John Hathaway, senior portfolio manager at Sprott Hathaway Special Circumstances Strategy, says in a recent interview that it’s possible for the Fed pivot to arrive by September as the economy continues to slow.
Phillip Streible: This will limit the rise of gold
However, not all analysts are optimistic that gold is ready to return to $2,000. On Friday, the US Department of Commerce’s core Personal CPI!s showed inflation at 4.8%, close to a 40-year high. Phillip Streible, chief market strategist at Blue Line Futures, comments:
If inflation stays warm, the Fed will continue to aggressively raise interest rates. This will limit the rise of gold.
Phillip Streible also says that he would like to make some profit up to $1,800 with this new rally underneath.
TDS: Continued outputs in yellow metal will increase in severity
The gold market is holding a new critical support level towards the weekend. So it could be at the top of a short-term rally. But one Canadian bank sees the recent price action as a selling opportunity. TD Securities said they have launched a tactical short position under commodity analysts. The new bearish bet comes as gold prices saw a solid bounce this week after the Fed’s decision to raise interest rates another 75 basis points. Analysts make the following statement:
We think the repricing in Fed expectations will exacerbate continued yellow metal outflows. We anticipate that this will lead to a decrease in prices. That’s why we’re entering a tactical short position underneath. Gold prices are falling like dominoes. But given the slowdown in growth, Chairman Powell attributed a large September hike to data, accelerating a short-term rally in all assets.
“Gold prices are in a long-term downward trend”
TD Securities notes that this hurdle must be removed to trigger a short-term rally. He says that the price level to watch in this direction will be $ 1,780. While gold prices are poised to rise, TD Securities predicts that gold prices are in a long-term downward trend. In this context, analysts make the following assessment:
Large inflows into gold ETFs continue to reverse. Also, other speculative groups are pressing for them to dissolve their bulge in the yellow metal. Given these situations, gold markets are set up for additional price weakness. The risk of a CTA buyout program associated with the recent rally is mitigated by a bid wall tied to both commercial investors and ETF exits.
