Latest US economic data pointed out that the risk of stagflation has increased. It also revealed that consumer sentiment continues to decline. Meanwhile, inflation expectations have risen sharply. With the impact of these developments, gold prices made solid gains on Friday.
UofM Gold prices jump as consumer sentiment declines
On Friday, the University of Michigan announced that its Consumer Sentiment Index dropped to 63 from 68.1 in September. Meanwhile, economists were predicting it would fall to 67.2. Significantly weaker data than expected was a rally catalyst for gold prices. The gold market was already seeing a significant rally ahead of the report. Still, the disappointing data provided further support. At the time of writing, spot gold was trading at $1,914, up 2.46%. The University of Michigan underlines the following points in the report in question:
Consumer sentiment fell nearly 7% in October after showing little change for two consecutive months. Assessments of personal financial situation fell by about 15%, primarily due to a significant increase in concerns about inflation, while one-year expected business conditions also fell by about 19%. However, expected business conditions have changed little over the long term, indicating that consumers believe the current deterioration in economic conditions will not continue.
The atmosphere is tense, gold prices went on a Friday rally!
Increasing chaos in the Middle East continues to increase the safe haven demand for gold. Late Thursday, the Israeli government warned more than 1 million people in northern Gaza to evacuate as its war with Hamas escalates. Rumors are also increasing that Israel is preparing for a major ground attack on Gaza. At the same time, the United States announced that it was tightening sanctions on Russian crude oil exports. This caused oil prices to rise 4% on Friday.
With so much geopolitical uncertainty and volatility, investors want to keep some insurance and protection through the weekend, analysts say. cryptokoin.comAs you follow from , Friday rallies were common in 2022 following Russia’s invasion of Ukraine. The new bullish momentum has pushed gold prices above $1,900. Analysts note that gold is trading near resistance at its 50-day moving average of $1,924.60.
It is possible that there is a ‘short squeeze’, it is better to be careful!
“If you don’t know what’s going to happen over the weekend, you want to hold something that gives you some protection,” said Ole Hansen, head of commodity strategy at Saxo Bank. “We see short sales being closed and investors scrambling to get back into gold.” making my comment. Hansen is bullish on gold. However, he cautions investors to exercise some caution at these high levels. Because ETF investors are still reluctant to buy gold. So, he adds, it’s possible this could be a short-term ‘short squeeze’. In this context, the analyst makes the following statement:
The ETF market is still seeing modest outflows for this week. We really need institutional investors to show renewed interest in gold to see a sustainable movement in gold. There is still a significant resistance level for the market to overcome at $1,950.
In this environment, gold is a pretty good long-term play right now!
Darin Newsom, senior market analyst at Barchart.com, says he’s bullish on gold prices in the near term. “In such a move, from a shorter-term perspective, gold could become oversold very quickly,” the analyst said. But I cautiously want the price to rise.” says. Newsom adds that one of the reasons he is cautious is that he wants to be long in gold, bonds and the US dollar in this environment. However, he points out that it is not possible to have a long position in all three assets in the long run. In this regard, the analyst shares the following assessment:
But geopolitical uncertainty is the biggest wild card right now. We know what the Fed’s game plan is. This has already been established, so the spotlight has shifted to geopolitical uncertainty. This will be good for gold. We will see more instability through 2024 as we get closer to the US elections. So gold looks like a pretty good long-term play right now.
Critical level for an increase in gold prices
Phillip Streible, chief market strategist at Blue Line Futures, also urges investors to exercise caution at current levels. Streible adds that a 2% rally could create an attractive selling opportunity for investors disappointed by lackluster performance for much of the year. Based on this, the analyst draws attention to the following levels:
A move towards $1,926 would create a neutral environment for gold. Moreover, you will need to see prices rise above $1,960 for it to return to the uptrend.
To be informed about the latest developments, follow us twitter‘in, Facebookin and InstagramFollow on and Telegram And YouTube Join our channel!