Gold prices continue to monitor the performance of the US dollar, central bank policy decisions, the global economic outlook and bond yields to set medium and long-term direction. Analysts, on the other hand, expect the short-term outlook for the gold price to be volatile.
Gold rebounds from five-month low in September
Gold rebounded from a five-month low in September as the US dollar softened and rising Covid-19 cases rekindled safe-haven demand. The recovery in physical demand due to the bargain purchase also supported the sentiment. With the release of US non-farm payrolls data in the first week of September, the price of gold rose to $1,833.80 an ounce.
US nonfarm payrolls for August rose 2,35,000, well below economists’ forecasts and the weakest in seven months. New Covid-19 cases weighed on business data in the US. However, the soft employment report may prompt US Federal Reserve policymakers to delay any consideration of downscaling the asset purchase program at its next meeting.
Gold slumped to a five-month low in August due to these factors
In his recent Jackson Hole symposium speech, Fed Chairman Jerome Powell hinted that while the US job market is making clear progress, he expects significant progress in reducing the central bank’s stimulus measures. The measures taken by central banks to extend the stimulus will be good news for gold. In June, gold rallied nearly 7 percent amid rumors that the Federal Reserve will soon begin curtailing its massive bond-buying program. cryptocoin.com As we have previously reported, the gap in job creation has frustrated expectations of an early monetary tightening.
However, the European Central Bank (ECB) has signaled that it will reduce emergency bond purchases in the next quarter. At its last policy meeting on September 9, the bank announced its first small step towards unraveling the emergency aid that supports the eurozone economy during the pandemic. The ECB had promised to adapt to an even longer ultra-easy policy when it was announced in July, but persistent inflationary pressure weighed on the decision. Gold fell to a five-month low in August amid pressure from a strong dollar, strong stocks and recovery in US Treasury yields.
Gold’s short-term outlook likely to be choppy and slightly positive, analysts say
Concerns over physical market activity in key Asian countries due to the spread of the more lethal Delta variant also cast doubts on commodity prospects. The dollar index has made a strong start this year. It rose nearly 4 percent in the first quarter, but reversed most of the gains by the end of May. Optimism regarding the US economy and hopes of reducing fiscal stimulus measures gained momentum again. Since the dollar is the comparative pricing mechanism for gold, it is inversely proportional to the yellow metal.
Dollar volatility also affects the sentiment of other currencies. The euro slid to an eight-month low in August, but later gained in value. According to analysts, the short-term outlook for gold is likely to be choppy and slightly positive. The fundamentals are not strong enough to break their latest high. Investment demand is likely to remain steady due to a rally in equities and a strong dollar. Physical demand from India and China may also be more or less stable. According to analysts, prices continue to monitor the dollar’s performance, central bank policy decisions, the global economic outlook and bond yields to determine medium and long-term direction.
Jeff Wright: Gold’s next step still depends on range…
Jeff Wright, chief investment officer at Wolfpack Capital, said the precious metal’s “war to get back $1,800 and hold it” is not a sign of strength. Jeff Wright said, “Gold’s next move is still in range… It is between $1,750-1,850 for now, but there is a divergence at the lower end of the range.” said.
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