The gold price rose on the support of the dollar’s decline on Friday. However, the Fed’s insistence on an aggressive rate hike weighs on sentiment. However, the yellow metal is on track to post weekly gains. Analysts interpret the market and share their forecasts.
“At current levels, gold price appears to have bottomed out”
Spot gold price rose 1% to $1,725.5 at press time. Prices rose more than 0.5% during the week after falling for three consecutive weeks. U.S. gold futures, on the other hand, were last traded at $1,737, up 0.98%.
Meanwhile, the dollar index (DXY) fell 0.7% after hitting a one-week low. This made dollar-priced bullion cheaper for holders of other currencies. Michael Langford, director of corporate consulting firm AirGuide, comments:
At current levels, gold appears to have bottomed out in the short term. Ongoing unemployment claims and employment figures will significantly affect the central bank’s views on the strength of the underlying economy.
“Gold price fluctuates between digestion range”
Data released on Thursday showed that claims for unemployment benefits fell in the US last week. This underlined the robustness of the labor market. Hence, it supported the Fed’s aggressive rate hike expectations.
Fed Chairman Jerome Powell said the Fed is strongly committed to fighting inflation. He also noted that he is hopeful that it can be done without the very high social costs involved in previous campaigns to control rising prices. Markets expect the Fed to raise interest rates by another 75 basis points on September 21. DailyFX currency strategist Ilya Spivak comments:
Gold is essentially fluctuating between the digestion range of $1,685-1,680 and $1,725-1,720.
“We expect this level to be broken in the short term!”
By the way cryptocoin.comAs you follow, the European Central Bank (ECB) increased its policy rate by an unprecedented 75 basis points on Thursday. Fed funds futures are now pricing in an 85% probability of a 75bps rate hike at the Fed’s policy meeting September 20-21. Daniel Ghali, commodity strategist at TD Securities, comments on Powell’s speech:
Powell’s comments are fully consistent with the Jackson Hole Conference. The market is not pulling back prices for the next 75 basis point increase at its September meeting. There is a lot of buying support due to this technical range around $1,700. However, we expect this level to be broken in the short term.
“Gold can easily drop below $1,700”
Jeff Wright, chief investment officer of Wolfpack Capital, says gold prices fell after Powell’s statements. However, he notes that he did not hear anything different or significantly different from the statements he gave at the Jackson Hole economics symposium last month. Wright makes the following statement on the subject:
In the coming days, the dollar is likely to continue to strengthen, especially against the euro and the British pound. And gold could easily drop below $1,700. Now, I don’t see much support, or rather a compelling thesis, to step up to buy or support gold.
“Fed underlines solid job market”
Commenting on the latest developments in the market, FXTM market analysis manager Lukman Otunuga makes the following assessment:
This underlined a solid job market even as the Fed launched monetary bazookas. This is likely to fuel speculation around more aggressive rate hikes. Therefore, this is a negative situation for gold, which does not yield interest.
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