Gold futures rallied on Friday after pulling back briefly after better-than-expected US jobs data. However, it recorded its fourth consecutive weekly loss as the overall strength in the US dollar put pressure on commodity prices. The yellow metal started the week slightly lower on Monday. Analysts interpret the market and share their forecasts.
“Gold continues to be affected by the strengthening of the US dollar”
cryptocoin.comAs you follow, the precious metal closed its lowest in more than nine months on Friday. However, it managed to recoup only a small part of the losses towards the close. Colin Cieszynski, chief market strategist at SIA Wealth Management, comments:
Gold continues to be affected by the strengthening of the US dollar. For much of this week, the strength of the US dollar was all about capital leaving the offshore markets and seeking shelter in the US.
“The dollar will continue to be a major driver for the gold market”
The US Federal Reserve raises interest rates to combat inflation. In this environment, the US NFP came in above expectations. This showed the labor market remained healthy and eased recession fears. Therefore, it strengthened the Fed’s hand for 75 basis points in July.
Colin Cieszynski notes that the price action of gold is driven by a rally in US Treasury yields. The analyst says the move in the dollar next week may continue to be a major driver for the gold market. In this context, the analyst draws attention to the following data:
A number of important inflation reports are coming in throughout the week, including US consumer and producer price inflation reports, which could move the market.
“The market’s inflation concerns are equal to recession concerns”
The US created 372,000 new jobs in June, according to government data released on Friday. This data came above expectations. Senior analyst Jim Wyckoff underlines the following in a note:
Gold fell a bit on the news. But more importantly, US Treasury rates rose. U.S. bond yields, which soared this weekend, suggest the market is pushing inflation concerns closer to the market’s front burners, perhaps on par with recession concerns.
“Gold outperformed other investment instruments”
So far, 2022 has proven ‘ugly’ for traders in everything but the energy sector, according to Adrian Ash, director of research at BullionVault. The analyst says that gold prices have fallen further to date and makes the following comment:
The dollar rose with inflation. The Fed “pulled the carpet under all leveraged markets. He lost gold this week. However, the precious metal has still outperformed stocks, bonds or base metals so far at the start of the year. Forget crypto already.
“In this case, gold is likely to attract new entries”
According to Adrian Ash, the movement in gold exchange-traded funds does not imply any sort of rush for exits. From this point of view, the analyst makes the following assessment:
If the decline in world stock markets continues until the second half of this year, led by the increasingly stagflationist outlook, gold bullion may attract new entrants.
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