The Federal Reserve has signaled it will not be ready to cut interest rates before the summer. As this development is expected, gold investors may see higher volatility next week.
It is possible for gold investors to continue taking profits!
At the same time, analysts say, with a summer rate cut off the table, the central bank is unlikely to begin an easing cycle before the 2024 US elections in November. At first glance, the central bank’s attitude will be negative for gold. Because investors continue to take profits after gold failed to hold on to record levels above $2,400.
But some analysts say that despite the sharp decline, many investors are still making solid gains. Analysts also note that recent economic data has left the central bank in a difficult position as inflation remains stubbornly high and growth is slowing. They note that this also provides some support to gold.
Phillip Streible continues to rise on gold because…
Meanwhile, the US economy is likely entering a period of stagflation. That’s why Phillip Streible, Head of Market Strategy at Blue Line Futures, says he remains bullish on gold. However, he adds that investors should pay close attention to next week’s data. A disappointing nonfarm payrolls report showing weak job growth and high wages would paint an even clearer picture of stagflation, Streible says. He states that it is possible for this to remove gold prices from their current consolidation.
There are other factors that support gold!
US economic data and interest rates will likely create short-term volatility in the gold market. However, analysts note that this remains a secondary factor for the precious metal. cryptokoin.comAs you follow from , it saw its worst daily decline in the last two years at the beginning of the week. Despite this, gold’s correction from all-time highs has been relatively shallow. Analysts also note that there are other factors supporting gold, such as the US government’s rising debt and deficit.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, describes the price action in gold so far as a healthy correction. He adds that he sees the next major support level around $2,255. “Holding above this level will send a signal to the market that the pullback is nothing more than a weak correction within a strong uptrend,” says the analyst.
Robert Minter: $2,400 is not the highest level for the shiny metal!
Robert Minter, Director of Investment Strategy at abrdn, expects gold prices to remain well supported as institutions grow concerned about the rising US government debt. Minter adds that central banks will not change their view of the US dollar in this environment. In this context, the analyst makes the following statement:
At some point, the bond market vigilantes will return because government spending is out of control. Interest expense on US government debt is greater than US defense spending. There is an alternative to holding US Treasury bonds, and that is holding gold. General investors don’t see this yet, but they will at some point. $2,400 is definitely not the highest level for gold.
“Next week will be an important test for gold!”
Forex.com Senior Market Strategist James Stanley expects the Fed to maintain restrictive monetary policies throughout the summer. However, he says it will tone down the hawkish tones. “The basic background is that the Fed doesn’t want to raise interest rates,” Stanley said. “They will continue to leave the door open for interest rate cuts this year, and this will support gold prices,” he says.
But Stanley says he is less concerned with gold’s fundamental outlook. He also notes that he is more interested in short-term technical price movement. He says next week will be an important test for gold if the price closes the month below $2,300. The analyst states that this level has become an important pivot point. In this context, the analyst said, “Gold looks overbought on the monthly chart. A midweek close below $2,300 would cast a sizable shadow on the upside. “It’s also possible that it could cause problems for some bulls,” he says.
Economic data to watch next week:
- Tuesday: US Consumer Confidence
- Wednesday: ADP non-farm employment. ISM manufacturing PMI. JOLTS job postings. Federal Reserve monetary policy decision.
- Thursday: Weekly unemployment claims.
- Friday: Non-agricultural employment. ISM Services PMI.
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