Gold price could easily make another run from $2,000 next week as the geopolitical situation does not ease, but the volatile price action will continue.
Bart Melek: This could change the risk account
cryptocoin.com As we reported, gold rushed to record highs last week, dropping below $1,900 and stabilizing just under $1,930 on Friday. April Comex gold futures were down 0.80% to trade at $1,927.70 for the day.
Looking ahead, the market is experiencing another uncertain weekend on the geopolitical front as the war in Ukraine remains the biggest driver for commodities. Bart Melek, head of global strategy at TD Securities, said, “We are watching what is going on in Ukraine. Frankly, nothing is more important to the market. This can change the risk account,” he comments.
Fed has not derailed positive sentiment towards gold, according to Suki Cooper
Also, many in the gold market are not convinced that the Federal Reserve can raise interest rates another sixfold without significantly slowing the economy. Standard Chartered precious metals analyst Suki Cooper comments:
Gold price continues to trade above $1,900 despite the first Fed rate hike since 2018. The March meeting was hawkish, but it didn’t derail the positive sentiment towards gold. The current geopolitical risk has sparked concerns that inflation could rise further for longer and rekindle long-term interest in gold.
Suki Cooper warns of further volatility, noting that over the past few weeks, investor interest in gold, which has been a major driver of prices, has increased. According to the analyst, as the physical market came under pressure, growth in investor interest more than compensated for this weakness, suggesting that the volatile price action is persistent.
“The market is still skeptical of six more rate hikes”
Geopolitical uncertainty aside, investors are still digesting the Fed’s new hawkish stance. Everett Millman, precious metals specialist at Gainesville Coins, approaches the issue from this perspective:
Gold reacted negatively to the Fed, but we saw the metal wipe out most of its losses after the central bank’s announcement. As hawkish as the Fed is, the market is still skeptical of six more rate hikes. That’s a very aggressive forecast that doesn’t match the Fed’s 4.3% inflation expectations this year.
Everett Millman adds that any pullback in these expectations will be positive for the gold price going forward, and comments:
I’m bull right now. Gold’s pullback this week is very healthy. At the same time, we should watch out for more volatility.
According to Bart Melek, there is a positive environment for the gold price.
Moreover, inflation expectations are still worsening after the US CPI data in February showed inflation at 7.9%, the highest level in 40 years. “We still haven’t seen the huge increase in food prices,” says Bart Melek, stating that the problem is that 60% of the CPI components are up 5% year-on-year. The analyst explains the effect on gold as follows:
It is no longer temporary inflation. Goalkeeper. Inflation expectations may fail. When it comes to the price of gold, the Fed’s promise doesn’t become restrictive fast enough to fight inflation. This is a positive environment for gold.
Analysts’ gold price predictions
Bart Melek says a run towards $2,000 is not unlikely, but the question is whether gold can stay there. Analysts also stopped talking about gold’s drop to $1,400. “That’s the crux of it,” says Bart Melek, if the Fed becomes too restrictive, gold will sell, but on the downside it will be stronger considering a month ago.
Bart Melek notes that gold price levels to watch this week are $1,920 as support, then $1,875, and states when the first major resistance appears around $1,980. Everett Millman is looking at $1,900 as support and $2,000 as resistance. “After $1,950, I wouldn’t be surprised to see gold break $2,000,” the analyst says.
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