The gold price tumbled sideways on Monday as market participants gauged the global economic policy outlook and inflationary bullion demand countered hawkish comments from Federal Reserve officials that raised dollar and Treasury yields. Analysts’ market comments and forecasts cryptocoin.com compiled for our readers.
Market still undecided on where to go, according to Howie Lee
Gold is considered an inflationary hedge, but the metal is highly susceptible to high US interest rates, which increases the opportunity cost of holding non-yielding bullion. Howie Lee, economist at OCBC Bank comments:
Gold price has been locked in horizontal consolidation for a while, the market is still undecided on where to go. There is still some persistent demand to hedge against inflation.
US 10-year Treasury yields hovered close to the two-year highs that scaled the previous week. Traders await a speech from Fed officials this week ahead of the central bank’s policy meeting Jan. However, there were very hawkish comments that the market has almost completely priced the first rate hike for March and that rates will be 1.0% by the end of the year.
“Black swan event increases upside pressure on gold price”
AirGuide’s director of corporate consulting, Michael Langford, explains the impact of global and geopolitical developments on the price of gold:
The potential ‘black swan’ event, whether Russia will invade Ukraine and then China make a simultaneous move on Taiwan, adds to the upward pressure on the gold price. This ongoing uncertainty will cause gold prices to stabilize at current levels until further clarity is achieved.
As the dollar index (DXY) holds its gains on Friday, investors are gearing up for the Fed meeting with bets it will plot a year with several rate hikes. Spot gold remains neutral in the $1,815 to $1,830 range, according to Reuters technical analyst Wang Tao, and a breakout could suggest a direction.
Pablo Piovano: $1,800 for gold still a solid area of contention
Open interest on gold futures markets rose nearly 8,000 contracts on Friday, surpassing the previous day’s decline, CME Group’s preliminary readings showed. Instead, volume reversed the three-day increase in a row, shrinking around 110.3k contracts.
Market analyst Pablo Piovano notes that Friday’s second consecutive decline in gold prices occurred amid rising open interest, indicating that further declines are on the table, at least in the very near term. Against this, the $1,800 mark still emerges as a solid area of contention should sellers regain control of the market.
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