Gold price gained positive momentum for the third consecutive day on Thursday and continued its steady rise through the first half of the European session. Gold is now at $2,044, breaking the YTD high it reached last week. Thus, the yellow metal looks poised to build on its strong gains over the past month.
Gold price shines in focus of growth concerns
cryptocoin.comAs you can follow, gold has had a strong performance so far this year. Economists at UBS expect the yellow metal to continue its rise in the coming quarters. In this context, economists make the following assessment:
In the near term, prices are likely to remain responsive to changes in investor risk sensitivity and interest rate expectations. However, we think that the rally of gold will continue in the coming quarters. First, more safe-haven flows are likely as uncertainty over the economic growth outlook persists. Second, we think the USD will weaken further. Gold price tends to rise during periods of dollar depreciation. Moreover, downside risks to the dollar increased with the money market pricing of Fed rate cuts.
Gold will rise to around $2,080 in Q2
Gold price increased more than 8% in dollar terms in the first quarter. Erste Group Research economists expect the yellow metal to make good progress in the second quarter thanks to negative real returns. Economists explain their views on this issue as follows:
Real yields will remain negative in the second quarter of 2023. This, in turn, supports the rise in the price of gold. After the very strong increase in the first quarter, the gold price will only show a moderate increase in the second quarter. We expect the price to rise to around $2,080 in Q2.
Fed’s interruption of interest rate hike benefited the gold price
The latest consumer inflation figures in the United States (US), released on Wednesday, reaffirmed market expectations that the Federal Reserve may soon finish raising interest rates. In addition, March’s Federal Open Market Committee (FOMC) showed that some policymakers are considering pausing interest rate hikes after the failure of two regional banks. This is causing US Treasury bond yields to fall further and is seen as a key factor that benefits the non-yielding gold price.
Weakening US dollar goldI further supports
Meanwhile, the growing acceptance that the Fed will pause monetary tightening after raising interest rates for the last time next month and possibly start rate cuts in the second half of the year continues to put pressure on the US Dollar (USD). Indeed, the Dollar Index (DXY), which tracks the dollar against a basket of currencies, fell to its lowest level since early February. This, along with concerns about a deeper global economic downturn, adds to the bidding tone surrounding the US dollar gold price.
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