Should gold trade higher with the US stock market still at risk? Analysts see next week as a major test for gold as markets debate the effects of the Federal Reserve’s extremely high rate hikes. As Kriptokoin.com, we convey the opinions of world-renowned analysts about the market and gold.
US stock market still at risk
Gold ended the week with its first weekly gain after a five-week streak as the precious metal finally saw renewed safe-haven demand amid inflation and economic growth concerns. is closing. June Comex gold futures were last trading at $1,841.40, up 1.8 percent on the week. Going into next week, the hard sell in the stock space may not be over as the S&P 500 is now 20 percent below its all-time highs posted in January. OANDA senior official said in a statement:
In the last few weeks, we have seen sales in the stock market and gold goes with it. But then we hit a short-term peak in treasury yields, which opened the door for gold to act as a safe haven.
Market analyst Edward Moya said in an interview, “The US stock market is still at risk. We may see one last big drop. And we’ll probably see gold’s safe-haven features tested once again. Sales fatigue will soon end,” he said. Avery Shenfeld, chief economist at CIBC World Markets, said that markets are concerned about whether inflation and growth will be able to respond quickly enough to the Fed’s rate hikes. Noting that if this is not the case, the Fed will have to accelerate its already aggressive tightening program, Shenfeld said:
This is a few things the stock market is currently contemplating: Higher rates and gains that lower stock multipliers. a crushing recession. Instead, a smaller dose of Fed rates and consumer resistance to higher prices, an earlier cooling off, would significantly reduce recession risks.
Good news could come for gold
DailyFX strategist Michael Boutros warned that expectations for higher rate hikes are rising again. Boutros stated:
Markets need to reprice the Fed’s view of rates. There are doubts that 50 basis points will suffice at this level of inflation. If the Fed’s 75 basis point rate hike is adjusted again, there will be a headwind for gold. The idea that the Fed is making a policy mistake by acting too slowly is increasingly common. They need to break the cut and accelerate rate hikes even more. At this point they are already late. Therefore, if gold is in a difficult position and especially if there is a close below the $1,791 level, it may risk more selling below the $1,800 per ounce level. From what we see in the stock market, you would expect gold to rally. We did it this week, but the rally wasn’t impressive. Technically, we run the risk of testing the lows. $1,781 or deeper is still on the table.
Market analyst Edward Moya sees the Fed slowing down when financial conditions tighten enough and credit spreads widen. And that shouldn’t be too far in the future. The analyst ended his speech as follows;
This week we saw weaker economic data in the US. Unemployment claims have also increased. All expectations are for data corruption. The dollar may pull back a bit, which could be good news for gold. We could see gold holding $1,800 next week. However, further downside moves in equities could spoil that. This is starting to happen. If the stock market drops another 5 percent, volatility rises even higher and credit markets force the Fed into a less hawkish stance by 25 basis point gains. And this is not far. Good news for gold. Key data releases for next week are flash PMI and personal spending. Consumer spending is expected to weaken. The FOMC minutes are likely to be dated as we’ve already heard from Fed Chairman Powell and other FOMC members after the May meeting. Flash PMI is going to be important, especially if we start to see if data is getting closer to contraction.
