Investors are refraining from making big bets ahead of US economic data that could determine the Federal Reserve’s rate hike strategy. Therefore, gold prices changed little on Tuesday.
This would be a negative for gold prices
Spot gold held steady at $1,988.27 at press time. U.S. gold futures, on the other hand, were last unchanged at $1,999.40. The focus of the market will be on the core personal consumption expenditures index and GDP quarterly growth rate coming later this week. Peter Fertig, analyst at Quantitative Commodity Research, comments:
If consumer confidence is positive, the market will see the U.S. economy less likely to enter recession. This is also a negative situation for gold. The Fed’s restrictive monetary policy may limit the upside potential for gold in the near term.
probably a Gold prices continue their downward trendCheck
Investors estimate that there is an 88% probability that the Fed will increase by 25 bps at the next meeting. In a note, Carsten Menke, Julius Baer’s Head of Next Generation Research, highlights the following:
We believe that prices of $2,000 or more are justified only in the event of a broad-based and protracted US recession with the return of safe-haven seekers.
Gold is a safe investment amid economic uncertainties. However, rising interest rates increase the opportunity cost of holding zero-yield gold, making it less attractive. Spot gold is likely to end its bounce below the $2,009 resistance and then resume the downtrend, according to Reuters technical analyst Wang Tao.
The $2,000 level remains a key point
cryptocoin.com As you follow, gold rose after the March collapse of Silicon Valley Bank, which triggered fears of wider problems in the banking industry. However, expectations that the Federal Reserve and other major central banks will continue to raise interest rates to bring inflation back to their targets lowered the yellow metal’s value last week. Naeem Aslam, chief investment officer of Zaye Capital Markets, comments:
The precious metal began to lose its appeal. The main reason behind the decline of the gold price is the strength of the US dollar. This week’s US GDP data is likely to bring some buyers back to the market. Because if the data show more weakness than expected, traders will consider hedging their bets. The $2,000 level for gold remains a hot spot for traders and investors.
According to Naeem Aslam, when the price trades above this level, it raises hopes for a new record. “However, when the price trades below this point, traders believe that the precious metal may experience a significant correction,” Aslam says.
Gold unlikely to drop below $1,950
Still, Rupert Rowling, market analyst at Kinesis Money, wrote in a note on Monday that “the negative impact of a rising interest rate environment that has detracted from the unyielding physical gold will soon wear off, especially as the Fed seems to be nearing the end of its hike cycle.” says. In this context, the analyst makes the following assessment:
As market confidence remains so fragile, gold’s safe-haven appeal is likely to remain attractive to investors for a while, so while the price will need a fresh catalyst to get it back above $2,000 an ounce, gold’s recent drop below $1,950 is likely. very unlikely.
Strong data indicates that gold will fall further
The US Services PMI for April came out much stronger than expected at 53.7. After this, TD Securities analysts state that the gold price fell below $ 1,980. From this point of view, analysts draw attention to the following points:
This has pushed rates up along the curve, pushing the US dollar up sharply. It seems that speculators are closing their US dollar shorts, raising their positions in anticipation of a dovish move by the Fed. Similarly, in the gold market, money managers are probably increasing their recently reduced shorts. It also cuts purchased long positions.
According to analysts, PMI and potentially other economic data point to continued economic strength. Therefore, the market is starting to bet that interest rates may continue to rise. Therefore, analysts say there is additional room for gold to drop further. From this point of view, analysts point to the following levels:
As a matter of fact, we foresee a gold price of 1,975 dollars in the second quarter. Technically, we are seeing significant support just above $1,960. However, we think the yellow metal trend will reach $2,100 by the end of the second quarter of 2023. Investors should follow the data during the Fed’s quiet period. Strong data points to further gold declines, while weakness means strength for the yellow metal.
