Gold prices continued on their way to a three-session winning streak on Thursday amid the pressure of a stronger dollar. Meanwhile, the outlook for the precious metal continues to be overshadowed by expectations for further rate hikes by the US Federal Reserve. Analysts interpret the latest developments in the market and share their forecasts.
“Challenges remain for gold and other precious metals”
cryptocoin.comSpot gold traded at $1,832.60, down 0.2% after hitting a one-week high in previous sessions. U.S. gold futures fell 0.4% to $1,838.30. A survey released by The Institute for Supply Management (ISM) on Wednesday showed that raw material prices rose last month and the recovery in ex-factory prices signals that inflation may remain higher for a while. UBS analyst Giovanni Staunovo comments:
Short-term challenges remain for further rate hikes for gold and other precious metals. The focus of market participants remains on US economic data and how it affects the Fed’s monetary policy.
“Gold prices are only consolidating”
US central bank officials were split on Wednesday over whether the latest high inflation data and the ever-warm job market will require even more restrictive interest rates or patience to maintain tight monetary policy for a longer period of time, said Brian Lan, chief executive of Singapore-based GoldSilver Central. He comments on gold:
Gold prices are only consolidating. The dollar has strengthened and therefore we see gold prices slightly lower. Gold could possibly be range dependent until we have more data. The key question for many is, ‘What will the US Federal Reserve do when they meet this month and whether they will continue to raise interest rates and by how much?’ continues to be.
“Yellow metal escalated with this given combination”
According to Jeff Wright, chief investment officer at Wolfpack Capital, gold climbed on a combination of strong economic data from China and the decline of the US dollar in major currencies. Wright says China’s production data is currently higher than the estimates spearheading the Chinese reopening narrative. In addition, Wright points out that another factor contributing to the weakness in the US dollar is the strength in the euro.
Investors also evaluated the uncertainty over the path of interest rates in the US. Neel Kashkari, Chairman of the Minneapolis Federal Reserve, told business leaders in Sioux Falls, South Dakota, on Wednesday that he was “open-minded about whether it’s 25 basis points or 50 basis points at this point.” Separately, Atlanta Fed President Raphael Bostic noted on Wednesday that the Fed should continue to raise interest rates until the target range is between 5% and 5.25%. The central bank’s target rate range is currently between 4.5% and 4.75%.
“Gold finds some support after a tough February”
Meanwhile, US data on Wednesday showed S&P Global US manufacturing PMI fell to the final 47.3 versus February’s initial data of 47.8. The Procurement Management Institute’s manufacturing survey rose to 47.7% from 47.4% the previous month, but figures below 50% indicate that the manufacturing sector is still contracting. Rupert Rowling, market analyst at Kinesis Money, comments:
Gold found some support as the price rebounded to $1,830 after a tough February when the precious metal fell to a two-month low.
“The shiny metal will find a base at $1,775!”
The gold price managed to stay above its 200-Day Moving Average (DMA). According to strategists in the Credit Suisse report, this level stands at $1,775 and is expected to bring the shiny metal to the bottom. In this context, strategists make the following statement:
Gold fell below the 55-DMA currently seen at $1,859. However, it has so far managed to stay above the long-term 200-DMA currently seen at $1,775. We continue to anticipate that this will remain a bottom and that broader risk will rise again from there when the time comes. Above $1,890/1,900 is needed to clear the way for a retest of $1,973/98. Beyond that, a test of long-term resistance from the record highs of $2,070/72 in 2020 and 2022 is deemed necessary to re-defend an uptrend.
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