This article comes from: financial circles
With the expectation of interest rate cutTuesdaybingonearmeThe gold market is in a wait-and-see state. Investors are now waiting for a clearer signal from the Fed on its monetary policy, according to AdvanTrade. Naim Aslam, chief investment officer of ZayeCapitalMarkets, also pointed out that gold bulls are a little tired at the moment and are in urgent need of the Fed's policy guidance to restore market confidence.
Despite recent fluctuations in gold prices-June gold futures traded at 2309 per ounceTuesdaybingonearmeAbout $70, down slightly from Friday-but gold is still up about 15% from its low in mid-February. After the Fed decided last Wednesday to leave interest rates unchanged at 5.25% to 5.50%, the market raised a lot of questions about the Fed's future path to cut interest rates. Although inflation remains high and the Federal Reserve says it is not ready to cut interest rates, Chairman Colin Powell's comments suggest that interest rates will not rise further.
The employment data released on Friday brought new volatility to the gold price. The data showed that the US economy added 175000 jobs in April, below market expectations, while the unemployment rate climbed to 3.9 per cent and wage growth fell short of expectations. While the data theoretically supports the Fed's interest rate cut, which could push gold prices higher, AdvanTrade believes that uncertainty about market timing still dominates investor sentiment and that the recent sharp rise in gold prices could trigger profit-taking.
In the current economic environment, the Fed is widely expected to cut interest rates as early as September. While fundamentals seem to be good for gold, the recent weakness may be the result of investors taking advantage of the rebound to take profits. Looking ahead, precious metals markets will remain highly sensitive to Fed officials' comments and economic data, which could provide more clues to the timing of the Fed's rate cut in 2024.
From a technical point of view, gold prices show some support around $2300. Traders are keeping a close eye on this key level, which could further test support of $2230 if it breaks. If $2300 can be held, then bulls may retest the high of $2390.
Buck Merlek, head of commodity strategy at TD Securities, believes that despite the disappointing employment data, gold has limited room for short-term gains and $2330 is a reasonable short-term target. He stressed that gold prices were unlikely to exceed $2500 until the timing and magnitude of interest rate cuts became clearer.
Although gold prices may experience some fluctuations in the short term, gold is still seen as an attractive investment in the long run. Powell's comments set a cap on interest rates, which is expected to provide stable support for gold prices. In addition, long-term bull market expectations for gold remain solid as big countries continue to buy gold and demand from investors to hedge government debt grows.
With the economic calendar relatively light this week, AdvanTrade expects gold prices to maintain consolidation. The focus of the market will gradually turn to the monetary policies of other major central banks, especially the decisions of the Bank of England. In addition, gold is likely to be sensitive to the upcoming long-term bond auction as attention to the US debt problem increases.