Investors should expect to see higher volatility in the gold market as the precious metal continues to defy expectations, according to one strategist. However, the analyst says the yellow metal is becoming increasingly vulnerable in the near term.
Gold prices will eventually rise above record levels!
Ned Davis Research Global Investment Strategist Tim Hayes expects gold prices to eventually rise above last month’s record high of $2,448. However, he states that this exit will probably not occur until the Federal Reserve pulls the trigger on interest rate cuts. cryptokoin.comAs you follow from , gold could not maintain its gains last week and fell below the $ 2,350 support. Despite this, Hayes expresses his qualified bullish outlook.
According to many analysts, the gold market is still in a solid uptrend. However, the precious metal is once again driven by uncertainty surrounding the Fed’s monetary policy. At the beginning of the year, markets were pricing in six possible rate cuts this year. However, these expectations have been halved as inflation remains stubbornly high.
The background here is still favorable for gold!
The focus of the markets right now is Wednesday’s Consumer Price Index report. That’s why the shiny metal will be particularly fragile this week. Higher-than-expected inflation could force markets to take further rate cuts off the table. Hayes says the Fed’s continued fight against inflation will be challenging for gold in the near term. But he adds that investors need to look at the broader financial landscape.
Even though inflation remains high, growing slack in the labor market and weakening economic activity will prevent the Fed from raising interest rates, the strategist says. In this context, Hayes shares the following assessment:
The trend ahead is still towards easing policies and this has not changed. The background here is still favorable for gold. I wouldn’t be surprised if it starts to rise again once we get more confirmation that bond yields are trending downward and that we will have accommodative monetary policies.
He doesn’t have the individual fascination with gold that would create some kind of bubble!
Tim Hayes states that in addition to gold improving opportunity costs, another important factor supporting gold’s rise this year is investment sentiment. Hayes adds that the gold market is nowhere near the frenzy that marked previous peaks.
Analysts state that gold’s double-digit rise this year is due to central bank demand and strong investor interest, especially in Asian markets. But Western investors have largely ignored the precious metal and sold their positions in gold-backed exchange-traded funds. “We don’t see the individual fascination with gold that would create some kind of bubble,” Hayes says.
And if investors enter the gold market!
Costco’s gold sales of $100-200 million a month have raised some concerns about froth in the market. However, Hayes says the market is still very limited. He also notes that the market has reached the mania stage when your taxi driver starts talking about gold.
Although Hayes sees gold rising by the end of the year, he doesn’t expect the same explosive movement seen at the beginning of the year. He adds that the change in interest rates reduces speculative interest in the precious metal. Hayes says he sees gold prices consolidating in an uptrend as investors buy dips in price. In this regard, the strategist said, “We reached record levels without individual participation. So what will happen when investors enter the market? says.
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