Gold prices rose on Friday, gaining their second consecutive weekly gain, driven by soft economic data from the United States. US economic data, including housing and employment figures, point to a slowdown. This increases gold prices on hopes of interest rate cuts. While low Treasury yields support gold by reducing holding costs, the strong dollar restricts demand, affecting prices.
Gold is poised for its second consecutive weekly gain
cryptokoin.comAs you follow from , gold prices started to rise on Friday. Thus, the shiny metal is poised for its second consecutive weekly gain. Softer U.S. economic data has investors optimistic about lowering interest rates later this year. Gold rose more than 1% this week, adding to the previous week’s gain of 1.7%.
Recently released economic data in the USA points to a potential slowdown. Thursday’s report showed that first-time applications for unemployment benefits fell modestly, while new home construction fell significantly. Weak retail sales last month keeps the possibility of a rate cut in September on the table. Low interest rates generally support gold prices by reducing the opportunity cost of holding non-yielding gold bullion.
The impact of yields and the dollar on shiny metal
U.S. Treasury yields fell slightly on Friday as investors analyzed the latest economic data for signs of a slowing economy. The yield of the 10-year Treasury bond decreased by 2 basis points to 4.23%, and the yield of the 2-year Treasury bond decreased by 2 basis points to 4.709%. The number of Americans filing new unemployment claims fell by 5,000 to 238,000 in the week ended June 15, slightly above economists’ forecasts. Housing starts fell more than expected last month, falling 5.5%, with the seasonally adjusted annual rate dropping to 1.277 million units.
The US dollar rose to an eight-week high against the yen on Friday and remained near a five-week high against the pound. The dollar index, which measures the currency against six major peers, rose 0.41% overnight. This increase follows dovish signals from the Swiss National Bank and the Bank of England, the latter of which pointed to a potential interest rate cut in August. The dollar index posted a slight weekly gain, extending its winning streak to three weeks. Market analyst James Hyerczyk evaluates the impact of the dollar and treasury yields on the yellow metal as follows:
Low Treasury yields and a strong dollar have a mixed effect on gold prices. Low yields are supportive because they reduce the opportunity cost of holding non-yielding assets such as gold. When bond yields fall, gold becomes more attractive as an investment. However, since gold is priced in dollars, a stronger dollar tends to be restrictive. As the dollar strengthens, gold becomes more expensive for foreign investors, potentially reducing demand
Market forecast: Gold bulls have an advantage
Analyst James Hyerczyk evaluates the latest situation and technical picture of the gold market. Given current economic data and trends, gold prices are likely to maintain upward momentum in the short term. The potential for further interest rate cuts and lower Treasury yields supports the bullish outlook for gold. While a stronger dollar could create some headwinds, the overall economic environment suggests continued strength for bullion. Investors will try to determine the direction of the market by closely following existing home sales data as well as manufacturing and services Purchasing Managers Index data for June.
The upside momentum in gold may continue to increase as the market moves to the strong side of the 50-day moving average at $2,344.26. This indicator became the new support. The nearest upside target is the short-term swing top at $2,387.79. Breaking this level with strong conviction could trigger momentum towards the May 20 record high of $2,450.13.
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