Investors are waiting for US inflation data that could lead the Fed to solidify its aggressive stance on monetary policy. With the effect of this, the rally of the dollar continues. Gold prices fell to a nine-month low on Tuesday amid the pressure of rising interest rates and a stronger dollar.
Jeffrey Halley: Gold prices could drop to $1,700
Gold rallied a little after hitting $1,722.36, its lowest level since Sept. 30. Spot gold was up 0.10% at $1,735.77 at press time. U.S. gold futures rose 0.27% to $1,736. Jeffrey Halley, senior analyst at OANDA, comments:
Gold seems to be trading in direct correlation with EUR/USD in Asia. If EUR/USD dips to 1.0000 in Asia, a drop to $1,700 is possible. I think gold has found a few friends around $1,730 in the past few days. But it doesn’t look like it will seriously reverse its recent sales.
75 basis points gain on Fed’s table gains strength
cryptocoin.comAs you follow, DXY has reached the new high of 20 years. Therefore, dollar-priced gold has become more expensive for buyers of other currencies. Meanwhile, data on the US consumer price index, an important measure of inflation, is expected to be released on Wednesday. Estimates are for prices to increase by 8.8% in June compared to the previous year.
Atlanta Fed chief Raphael Bostic said on Monday that the latest inflation data were not encouraging. He also noted that the lack of month-to-month improvement in the pace of price increases warrants another 0.75 percentage point increase in the fed funds rate when policymakers meet later this month.
“It is possible to open the way to $1,700-1,711 for gold prices”
Higher interest rates increase the opportunity cost of holding non-yielding bullion. Reuters technical analyst Wang Tao sees spot gold test a support at $1,721 possible. He also says that a break below this could open the way towards $1,700-1,711.
Edward Moya: Gold prices under pressure
Despite the recession risks, lately investors are choosing the dollar over gold. That’s why the dollar has peaked in nearly twenty years. It has also eroded the attraction for bullion among offshore buyers. Here’s what OANDA senior analyst Edward Moya predicts:
The dollar has made great breakthroughs. There are also expectations for a sizable rate hike after the latest US federal report highlighted a strong labor market. Therefore, gold prices are under pressure. Gold is likely to temporarily drop below the $1,700 level. It could then see strong support near $1,670.
Ricardo Evangelista: These limit gold losses
Friday’s U.S. data showed the labor market strengthened with solid job gains. It also gave the Fed the necessary strength to raise rates by another 75 basis points this month. Meanwhile, Fed’s Esther George, who opposes the central bank’s 75 basis point increase last month, said that sudden changes in interest rates “could create tension” in the economy. Ricardo Evangelista, senior analyst at ActivTrades, comments:
But growing pessimism about the state of some economies in Asia and a degree of geopolitical instability are limiting gold’s losses as bullion remains a safe haven in difficult times.
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