Decline in Treasury rates and rising recession fears continue to support the safe-haven metal. In this environment, gold prices headed for the third week in a row. However, it remained steady at a one-month high on Friday ahead of the much-anticipated US jobs data. Analysts interpret the market and share their forecasts.
Jeffrey Halley: Gold continues to capitalize on this situation
Spot gold hit its highest level since July 5th. Later, it remained flat at $1,790.66 level. However, the yellow metal managed to gain 1.5% this week. US gold futures were last traded at $1,807.70. Jeffrey Halley, senior analyst at OANDA, comments:
U.S. bond yields fell as markets continued to price in peak inflation and recession. Gold, on the other hand, continues to benefit from the combination of the weak dollar driven by this situation.
“Gold likely to continue sliding towards $1,900.00”
The yield on 10-year Treasury bills fell. This reduced the opportunity cost of holding interest-free gold. Although the dollar rose, it struggled to recoup its losses after falling at the sharpest pace in two weeks on Thursday. The focus of the market is currently on the US July nonfarm payroll report. Economists expect an increase of 250,000 jobs. According to analysts, this data will give more clarity to the Fed’s aggressive tightening plans to fight inflation. Jeffrey Halley comments:
A soft payroll is likely to lead to another dollar weakness as rates fall. So it will support the bullish momentum of gold. Gold is likely to continue sliding towards the $1,900.00 region in the coming sessions.
David Meger: Gold got support from them
cryptocoin.comAs you follow, the Bank of England increased interest rates at the highest rate since 1995 in an effort to stifle rising inflation. Meanwhile, the solidarity trip of the Speaker of the US House of Representatives Nancy Pelosi to Taiwan is on the agenda. On Thursday, a day after the trip, China fired multiple missiles near Taiwan. Therefore, the China-US tension remains in focus. David Meger, director of metal trading at High Ridge Futures, comments on the implications of the developments as follows:
Eventually, yields drop a bit. This, along with the recent weakness of the dollar, is one of the most important benefits of gold. We’ve also seen some growing tensions between the US and China. So this is another reason why gold is well supported.
“The dominant rise among the gold beetles could quickly fade”
Investors also evaluated data last week showing that the number of Americans filing for new unemployment benefits has risen. Investors are now watching the US nonfarm payrolls report, due Friday. In a note, TD Securities highlights:
However, non-farm payrolls are in the headlines of the week. It’s possible that a stronger-than-expected report will quickly limit the prevailing rise among the golden beetles.
Jim Wyckoff: Short-term technical postures improved this week
Evaluating the markets, Kitco Metals senior analyst Jim Wyckoff draws attention to the following in a note:
Short-term technical stops for gold and silver improved this week. In addition, the short-term closing and some new chart-based purchases in the futures market are also prominent.
George Milling-Stanley: Your downgrade is overrated!
The ISM barometer of business conditions in service-oriented companies such as restaurants, retailers and hotels rose to a three-month high of 56.7% in July. This indicates that the economy continues to expand despite increasing headwinds. George Milling-Stanley, chief gold strategist at State Street Global Advisors, explains:
I think the downgrade is overrated. We dropped $100 in a very short time as if the US was already in or on the verge of a recession. There is no way to escape this.
“That’s where the gold belongs”
In particular, several Fed officials pointed out that the US economy is not yet in a recession. It also reiterated its commitment to cool inflation at a four-year high. In this context, the strategist says that recession thinking is starting to change. Milling-Stanley comments:
This led to a rally in most assets. Gold is also in that category. It’s now around $1,800 and I guess that’s where the gold belongs.
The ‘recession’ conundrum of the USA
Cleveland Federal Reserve Loretta Mester said on Thursday that the United States has not entered a recession despite two-quarter declines in gross domestic product. But she stressed that she still supports higher interest rates until inflation falls.
From a stock market perspective, an economic recession appears less likely in the US, according to a recession probabilities measure created by strategists at JP Morgan Chase & Co.
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