A break in the dollar rally eased the pressure on bullion. After that, gold rallied on Thursday from the nine-month low it had seen in the previous session. But analysts warn that the relief will be temporary.
Matt Simpson: Bottom takers trying to catch a falling knife
cryptocoin.comAs you follow, the dollar hit 20-year highs on Wednesday. It later dropped around 0.2%, giving support to the dollar-priced bullion. Spot gold was up 0.14% at $1,741 at press time. U.S. gold futures rose 0.2% to $1,740. City Index senior market analyst Matt Simpson comments:
With momentum pointing south, bottom buyers are effectively trying to catch a falling blade. $1,721 and $1,700 are potential support levels for the bulls to consider gambling. But until the dollar peaks, it’s probably a gamble.
Ilya Spivak: Gold price has room for decline
The strength in the dollar in the previous session pushed the bullion as much as 1.9% to $1,731. Thus, the yellow metal hit its lowest level since September 30. DailyFX currency strategist Ilya Spivak shares his predictions:
Gold has room to continue its decline. If gold drops above the support at $1,715, a drop below $1,700, or around $1,680, is possible.
Suki Cooper: Gold succumbs to risk aversion
Meanwhile, the minutes of the Federal Reserve’s policy meeting on Wednesday, June 14-15, have been released. According to the minutes, a worsening inflation situation prompted Fed officials to rally around excessive rate hikes. Fed minutes showed that participants justified a 50 or 75 basis point increase later this month.
However, gold prices were volatile last month. The worsening economic outlook and the weight of the rising dollar have squeezed gold into a range. Therefore, the precious metal was waiting for a new catalyst. Higher interest rates and bond yields increase the opportunity cost of holding non-yielding bullion. Standard Chartered analyst Suki Cooper comments on the market developments as follows:
Gold’s response has been pretty muted as pricing begins to rise as the possibility of another sharp rate hike rises in July. In recent sessions, gold has succumbed to risk aversion as the dollar has benefited.
Tai Wong: Soft CPI data is needed for a permanent rise in gold
Interest rate hikes to combat rising inflation raise the opportunity cost of holding non-interest-bearing bullion. Tai Wong, an independent metals trader based in New York, comments on the developments as follows:
The hawkish Fed minutes, which suggest an even more restrictive stance, provided no relief for the metals markets. A short-term rally is possible if the payrolls are soft. However, a softer US CPI data is needed next week for a sustained rise for gold. This is necessary to pull the Fed back from launching another big tightening volley.
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