purebun.com – Finally, Gold Prices are Strong Again, Helped by the Weakening of the US Dollar. Gold prices rose in trading Monday. The weakening of the US dollar was able to help the price of gold bullion rise again after experiencing losses for some time.
Meanwhile, the perception that eased fears of a 100 basis point or 1 percent increase in interest rates by the Central Bank of the United States (US) or the Federal Reserve (the Fed) also supported world gold prices today.
Quoting CNBC, Tuesday (19/7/2022), the price of gold in the spot market rose 0.8 percent to USD 1,720.81 per ounce at 0926 GMT, after falling to its lowest level in almost a year last week.
Meanwhile, the price of US gold futures also rose 0.8 percent to USD 1,717.40 per ounce.
The US dollar index fell from its highest level in 20 years. The US dollar index fell 0.3 percent, making gold bullion cheaper for buyers holding currencies outside the US dollar.
“Commodity markets reduced the likelihood of the Fed’s rate hike by 100 basis points at its July policy meeting, which turned out to be giving new steam to gold,” said Exinity chief market analyst Han Tan.
US consumers also reduced inflation expectations in July in addition to the sharp decline in gasoline prices over the past month, a development that is likely to be welcomed by Federal Reserve officials concerned that high inflation expectations could entrench and complicate their task of controlling price increases.
The Fed’s aggressive inflation-fighting policies have undermined gold’s safe-haven appeal, as rising interest rates make interest-free assets appear less attractive.
Gold Price Predicted to Fall Below USD 1,700
Wall Street analysts and precious metals investors this week saw that the bearish sentiment on gold prices was still high. This pressure could push the price of gold to fall below USD 1,700 per ounce.
Sentiment in the gold market has indeed deteriorated in recent weeks. This is because investors see that the US Central Bank or the Federal Reserve (the Fed) will raise interest rates aggressively to suppress inflation.
With this sentiment there are two challenges that must be faced by the price of gold. The first is the increase in yields on US bonds and the second is the increase in the US dollar exchange rate.
Gold prices fell to their lowest level in almost a year last week as the US dollar touched the important milestone of reaching equilibrium with the euro for the first time in 20 years.
Analysts say that although gold has fallen to $1,700 per ounce, there hasn’t been a major capitulation move in the market.
Alliance Financial precious metals dealer Frank McGee said he expects gold prices to fall lower as more traders are forced to liquidate their lost gold positions.
Kitco.com senior technical analyst Jim Wyckoff noted, the technical outlook suggests that bearish sentiment in gold prices will control the market in the near term.
“The chart is completely bearish and the path of least resistance for price remains sideways to the downside,” he said.
This week, 16 Wall Street analysts participated in the Kitco News gold survey. Of this amount, only three analysts or 19 percent are optimistic that gold prices will rise in the near future.
At the same time, six analysts or 50 percent stated that the gold price was bearish or that gold was under pressure. In addition there are five analysts or 31 percent declared neutral against the precious metal this week.
Meanwhile, 1,107 votes were cast in the online Main Street poll. Of these, 441 respondents or 40 percent see gold prices will rise this week.
Meanwhile, another 458 or 41 percent said gold prices would be lower and 208 voters or 19 percent said they were neutral in the near future.
Not only has bearish sentiment in retail investors improved this week, but participation in the survey hit its highest level in a month. This indicates that more investors are paying attention to the market.
Despite the strong bearish sentiment in the market, some analysts have not given up. Some analysts say the price of gold will bounce or strengthen because it is technically oversold.
“Short-term, the August contract is sharply oversold. If the contract can hold its low of USD 1,695, the contract could put itself in a rallying position this week,” said Darin Newsom’s president of research firm Darin Newsom.
“Besides, the US dollar looks overheated in the short term and could weaken slightly next week,” he added.
Forexlive.com chief currency analyst Adam Button said he sees ewmas prices to be bullish as the market begins to rethink expectations of a 100 basis point increase later this month.
The market began to consider aggressive moves after the US CPI showed inflation rose to 9.1 percent in June 2022 which is a 40-year high.
“Comments from Fed officials and a drop in inflation expectations in the University of Michigan survey ensured an increase of only 75 basis points on July 27,” Button said.
“That leaves room for a relief rally for gold.” he added.