The price of gold rose on Monday as rising inflationary pressures and worries around Ukraine created demand for the precious metal, and investors are waiting for more data this week to gauge how aggressively the Federal Reserve will raise interest rates. Analysts’ market comments and forecasts cryptocoin.com compiled for our readers.
“Yellow metal has been an excellent protection against these last month”
Saying Friday’s strong US jobs report is another challenge that gold has tackled really well, Saxo Bank analyst Ole Hansen said:
Gold has been an excellent hedge against falling stocks and rising bond yields last month. This adds to the underlying positive situation for gold at the moment. It is clear that inflation is not temporary. In fact, another issue that we cannot ignore is the geopolitical risks currently in the market in Russia and Ukraine.
Benchmark 10-year U.S. Treasury yields remained close to their highest since December 2019 after Friday’s U.S. jobs report showed nonfarm payrolls increased by 467,000 jobs last month. Job gains have boosted expectations for a hawkish Fed to fight inflation this year. Investors are now waiting for US inflation figures for January to be released on Thursday for more clues about the Fed’s rate hike.
Gold price action is very uncertain, according to Warren Venketas
While gold is considered a hedge against inflation and geopolitical risks, rate hikes increase the opportunity cost of holding non-yielding bullion. DailyFX analyst Warren Venketas says persistent inflation combined with the threat of war in Ukraine and rising oil prices is pushing gold upward, while an increasingly hawkish Fed is adding to the rising opportunity cost of holding gold. The analyst comments:
Gold price action remains very uncertain as markets expect a fundamental catalyst for divergences in some direction.
“Gold stuck between fears of interest rate hikes and high inflation concerns”
The moves were primarily driven by fear, according to James Hyerczyk, who noted that gold futures rose on Friday after a volatile, bilateral trade. The analyst explains the impact of the developments on the markets as follows:
An unexpectedly optimistic US jobs report pushed US Treasury yields up sharply, leading to a stronger dollar. Fear that the Fed would raise interest rates faster than expected, caused by this situation, lowered gold in the early hours of the session. However, gold prices recovered and closed the session higher, amid fears that the sharp rise in employment would trigger another strong rise in consumer inflation.
The analyst says that while fears of interest rate hikes weighed down, concerns about high inflation data pushed the gold up. After January’s surprisingly strong jobs report, this week’s focus is on consumer inflation and what the Federal Reserve’s plan to raise interest rates could mean. The consumer price index will be released on Thursday.
Reaction to the employment report was swift, with traders in the futures market pricing in six rate hikes this year, with many economists making four or five forecasts. The headline inflation figure is expected to drop to 0.4% from 0.5% in December. However, this will still be a hot 7.2% year-over-year.
Pablo Piovano: Gold price remains supported at $1,780
Open interest in gold futures markets extended the downtrend on Friday, shrinking nearly 1.5k contracts, according to preliminary figures from CME Group. Instead, volume rose for the second consecutive session, this time with around 12.7k contracts.
According to market analyst Pablo Piovano, the gold price reversed the previous day’s decline amid the lower open interest rate on Friday, which may indicate that extra gains from there are not very desirable in the near term. However, the analyst states that the increase in volume could allow for more gains to test the $1,820 area where the 20-day SMA is located.
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