Falling government bond rates and growing recession fears continue to support the safe-haven metal. In such an environment, gold prices rose for the third week in a row. However, it held steady at a one-month high on Friday ahead of long-awaited US jobs data. Analysts interpret the market and share their forecasts.
Jeffrey Halley: Gold continues to capitalize on this situation
Spot gold hit its highest level since July 5. It later remained at the level of $1790.66. However, the yellow metal managed to gain 1.5% this week. US gold futures last traded at $1,807.70. Jeffrey Halley, Senior Analyst at OANDA, comments:
U.S. bond yields fell as markets continued to price in a time of peak inflation and recession. Gold, on the other hand, continues to benefit from the combination of a weak dollar fueled by this situation.
“Gold Will Likely Continue to Slide Towards $1,900.00”
The yield on 10-year Treasury bills fell. This reduced the opportunity cost of holding interest-free gold. Although the dollar rallied, it struggled to recoup losses after falling at its fastest pace in two weeks on Thursday. Market focus is currently on the US non-farm payrolls report for July. Economists expect an increase of 250,000 jobs. According to analysts, these data will give more clarity to the Fed’s aggressive tightening plans in the fight against inflation. Jeffrey Halley comments:
Soft payrolls are likely to lead to further dollar weakness as rates fall. Thus, it will support the bullish momentum of gold. Gold is likely to continue to slide towards the $1,900.00 region in the coming sessions.
David Meger: Gold got support from them
cryptocoin.comAs you can see, the Bank of England has raised interest rates to the highest rate since 1995 in an effort to quell rising inflation. Meanwhile, a solidarity trip to Taiwan by the Speaker of the US House of Representatives, Nancy Pelosi, is on the agenda. On Thursday, a day after the trip, China fired multiple missiles near Taiwan. Therefore, the tension between China and the US remains in focus. David Meger, director of metals trading at High Ridge Futures, comments on the implications of the development as follows:
In the end, yields drop a bit. This, along with the recent weakness of the dollar, is one of the most important advantages of gold. We have also seen some rising tensions between the US and China. So this is another reason why gold is well supported.
“Dominant rise among gold bugs could quickly fade”
Investors also weighed data last week showing that the number of Americans filing for new jobless benefits rose. Investors are now eyeing the US non-farm payrolls report due on Friday. In a note, TD Securities points out:
However, non-farm payrolls are among the week’s headlines. It’s possible that the stronger-than-expected report will quickly cap the prevailing surge among gold beetles.
Jim Wyckoff: Short-term technical positions improved this week
Assessing the markets, Kitco Metals senior analyst Jim Wyckoff points out the following in a note:
Short-term technical stops for gold and silver improved this week. Additionally, a short-term close and some new chart-based buying in the futures market are also highlighted.
George Milling-Stanley: Your reduction is overrated!
The ISM barometer of business conditions in service companies such as restaurants, retail and hotels rose in July to a three-month high of 56.7%. This indicates that the economy continues to expand despite increasing headwinds. George Milling-Stanley, chief gold strategist at State Street Global Advisors, explains:
I think the level reduction is overrated. We fell by $100 in a very short time as if the US was already in recession or on the verge of recession. There is no way to escape this.
“There’s gold there”
In particular, several Fed officials pointed out that the US economy is not yet in recession. He also reiterated his commitment to reduce inflation to a four-year high. In this context, the strategist says that recessionary thinking is beginning to change. Milling-Stanley comments:
This led to the growth of most assets. Gold is also in that category. It’s about $1,800 now and I guess that’s where the gold is.
The US ‘recession’ conundrum
Loretta Mester of the Cleveland Fed said Thursday that the United States has not entered a recession despite two quarters of falling gross domestic product. However, she emphasized that she still supports higher interest rates until inflation falls.
From a stock market perspective, an economic recession appears less likely in the U.S., according to a recession probability measure compiled by strategists at JP Morgan Chase & Co.
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