The gold price rallied as the dollar gave back some of its gains after European markets reopened after Easter. Traders await more economic data for clues on the global rate hike path. Analysts interpret the market and share their forecasts.
Real interest rates continue to be the driving force for gold price
The tight US labor market report released on Friday caused gold to tumble 1% on Monday and raised bets on the Fed’s rate hike. The probability of a 25 basis point increase is currently fixed at 72%. However, the gold price climbed above the $2,000 level again on Tuesday. Evaluating the latest developments in the market, UBS analyst Giovanni Staunovo comments:
US real interest rates continue to be an important driver for gold. However, if the Fed’s rate hikes come to an end and U.S. interest rates eventually tend to fall, then the dollar will weaken and give gold more help.
This week, markets will follow these data and events.
cryptocoin.com As we reported, Chicago Federal Reserve Chairman Austan Goolsbee, Minneapolis Fed Chairman Neel Kashkari and Philadelphia Fed Chairman Patrick Harker are scheduled to speak on Tuesday. Also, eurozone investors are expecting a week full of economic data, including February retail sales and March inflation readings for Germany.
ECB policymaker Pablo Hernandez de Cos said on Monday that core inflation in the euro area is likely to remain high for the rest of 2023, leaving the door open for further rate hikes. In Asia, consumer inflation in China, the largest consumer of bullion, fell to an 18-month low as demand remained weak, stressing the global economic recovery was uneven.
Gold price rise was a bit extreme!
Investors are now waiting for US consumer price data to be released on Wednesday for more clarity on the course of interest rates towards the Federal Reserve’s May policy meeting. OCBC FX strategist Christopher Wong comments on the impact of the data:
A higher-than-expected data may indicate that the Fed may raise interest rates once again in May… The rise of gold was a bit extreme… The possibility of the Fed’s rate hike once again may reduce the excessive rise. In the near-term, there are also technical setups to the downside for a corrective bearish move in gold prices.
“The decrease in the gold price was due to profit taking”
Gold prices rose for the sixth consecutive week last week. But on Monday, prices fell for the third consecutive session as global markets caught the post-Easter recession and much of Europe was still out. In his market commentary, Insignia Consultants research director Chintan Karnani says Monday’s drop for gold and silver is “profit taking and nothing more”.
Meanwhile, Karnani expects to see a rate-raising “pause period” from the May FOMC meeting and for the remainder of the year. The analyst believes that interest rates have “peaked” globally for now. He states that rising energy prices are “the only risk to my interest rate view.”
This report could easily raise precious metal prices
In his market commentary, Gold Newsletter editor Brien Lundin notes that gold fell on the belief that March US jobs data will prompt the Federal Reserve to continue raising interest rates by at least a quarter point at its May meeting. In this context, Lundin makes the following statement:
In reality, the rest of the economic data points to a significant slowdown, giving the Fed more reason to pause. The next key data point will come with the CPI report on Wednesday. Therefore, I don’t expect volatility to go away. An inflation report can easily push up precious metal prices.
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