Gold prices fluctuated slightly on Thursday, near a one-week high in the previous session, as the decline in US dollar and Treasury rates following the expected inflation data strengthened the need for faster rate hikes. Analysts’ market comments and gold forecasts, cryptocoin.com compiled for our readers.
“Gold will probably continue to be supported”
In the previous session, gold bullion hit a one-week high of $1,827.92, its highest level since Jan. At the time of writing, it is trading sideways at $1,822. Hareesh V, head of commodity research at Geojit Financial Services, comments:
Many investors expect a clear picture (about the contraction) from the Fed alongside the performance of the US dollar. That’s why prices are almost constant.
US consumer prices came in at 7% in December, the biggest year-on-year increase in inflation in four decades. This development strengthened the expectations that the Federal Reserve will start raising interest rates from March. The dollar index (DXY) fell to a two-month low following the inflation data, making gold more attractive to offshore investors. Stephen Innes, managing partner of SPI Asset Management, cites the catalyst for gold’s exit from the current trading range:
If the market fails to keep up with the Fed’s 2% interest rate pricing, gold will likely continue to be supported. But does it go higher? That’s the real question. We need a slightly more convincing turnaround from the Fed narrative.
The yellow metal held up ‘pretty well’, according to Suki Cooper
The US 10-year benchmark interest rates also fell and moved away from the two-year high they saw earlier in the week. Gold is considered an inflationary hedge, but the precious metal is highly susceptible to rising US interest rates, which increases the opportunity cost of holding non-yielding bullion. Standard Chartered analyst Suki Cooper says gold prices are holding up ‘pretty well’ even as the market continues to look for the first Fed rate hike in March:
Historically, gold has tended to price early in rate hikes. Price action shows the market is pricing in rate hikes and the strength of short-term DXY.
Gold is considered a hedge against rising inflation. However, David Meger, director of metals trading at High Ridge Futures, says inflationary pressures will bolster gold in the coming weeks, pushing it above the technical resistance around $1,830.
Meanwhile, it was a win on Wall Street to contain gold’s rise as inflation figures ease concerns about faster-than-expected rate hikes. Edward Moya, senior market analyst at OANDA brokerage firm, said in a note:
Gold appears to be in a good position. Because Treasury rates won’t recover much more solidly until financial markets’ balance sheet shrinkage is certain, and this won’t happen until at least a few Fed meetings.
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