The relentless momentum of the US dollar continues to wreak havoc on commodity markets. In this environment, gold prices are outperforming other assets, albeit affected by the strong dollar. Analysts interpret the market and share their forecasts.
Joe Perry: Gold likely to drop if DXY continues to rise
Looking ahead, some analysts see the risk of gold prices falling below $1,700 as the US dollar continues to flex its strength in global financial markets. At City Index, US market analyst Joe Perry notes that gold’s negative correlation with the US dollar index is currently at 0.96. From this, he says, a reading of 1.00 will be a perfect correlation between the two assets. “If DXY continues to rise, we can suspect that gold will go down,” Perry says.
An important turning point event for the US dollar that analysts are watching is the conversion of the pair to the euro. The euro is the largest component of the US dollar index (DXY). The single currency is trading at its lowest point against the US dollar in 20 years. Many currency analysts think it is just a matter of time before a reversal.
As the US dollar rises against the euro, some analysts are cautioning investors not to underestimate the current price environment. Many analysts see the US dollar’s rise against the euro as ‘the cleanest dirty shirt in the laundry basket’ that the gold market will eventually overcome.
Ole Hansen: Investors have no reason to hold gold right now
However, some say the US dollar is seeing broad-based strength in the global money market, which is a more challenging environment for the precious metal. cryptocoin.comAs you follow, the US dollar is trading at a 20-year high against the euro. In addition, it rose to a 24-year high against the Japanese yen. Ole Hansen, head of commodity strategy at Sax Bank, comments:
Everyone is taking a hit against the strength of the US dollar. Everyone believes the Fed can control inflation. Therefore, the US dollar is the preferred currency in the world. I have some doubts. But investors have no reason to hold onto gold right now until there are reasons to believe that the Fed can reduce inflation.
“Before gold prices stabilize…”
Ole Hansen says he watches to see if gold prices can hold the critical long-term support at $1,675. He notes that this is the lowest level of consolidation going back to 2020.
Hansen states that the momentum in the US dollar must end before gold prices stabilize. He adds that this won’t happen until the Fed changes its aggressive stance on interest rates.
“US CPI likely to add more fuel to dollar’s rise”
The Fed’s firm commitment to raise interest rates to cool inflation pressures remains. And that’s what drives the US dollar’s momentum and gold’s weakness. According to some market analysts, Wednesday’s inflation report could add more fuel to the US dollar’s rise.
Last month’s Consumer Price Index showed that inflation rose 8.6% in May. Warmer-than-expected inflation data prompted markets to price the 75 basis point hike in full, just two days before the Fed made its decision.
Lukman Otunuga: Yellow metal likely to suffer more
Going into Wednesday’s report, some economists say inflation could jump to 9% in June. They also note that it may force the Fed to take more aggressive measures at its meeting later this month. Ultimately, this will continue to put pressure on gold prices. FXM Senior Research Analyst Lukman Otunuga comments:
The precious metal has been stifled by a rising dollar and expectations for the Fed to continue its aggressive stance on higher interest rates. If the pending US CPI report meets or exceeds market expectations, the precious metal looks depressed. Therefore, he is likely to suffer more. If prices can surpass $1,700, the next key level is possible at $1,680.
Speculative financial investors exit more gold
The US dollar caused gold to temporarily drop to $1,720. Commerzbank economists report that continued and strong ETF outputs are also putting pressure on the yellow metal. In this context, economists make the following statement:
Any significant or permanent increase in the price of gold is blocked not only by the US dollar, but also by continued and strong ETF outflows. Gold ETFs tracked by Bloomberg posted 29 tons of output last week. Speculative financial investors have been withdrawing more and more from gold lately. Net long positions are at their lowest in three years, according to CFTC statistics.
Contact us to be instantly informed about the last minute developments. twitter‘in, Facebookin and InstagramFollow and Telegram and YouTube join our channel!
Disclaimer: The articles and articles on Kriptokoin.com do not constitute investment advice. Cryptokoin.com does not recommend buying or selling any cryptocurrencies or digital assets, nor is Kriptokoin.com an investment advisor. For this reason, Kriptokoin.com and the authors of the articles on the site cannot be held responsible for your investment decisions. Readers should do their own research before taking any action regarding the company, asset or service in this article.
Warning: Citing the news content of Kriptokoin.com and quoting by giving a link is subject to the permission of Kriptokoin.com. No content on the site can be copied, reproduced or published on any platform without permission. Legal action will be taken against those who use the code, design, text, graphics and all other content of Kriptokoin.com in violation of intellectual property law and relevant legislation.