Gold prices soared to an eight-month high on Thursday as U.S. Treasury yields fell, while news of mortar fire in eastern Ukraine also led investors to the safe-haven bullion. At the time of writing, spot gold was up 0.74% to trade at $1,884, surpassing the June high of $1,879.48. U.S. gold futures rose 0.8% to $1,886. We have compiled analysts’ gold forecasts and market comments for Somanews readers.
Edward Moya’s gold predictions point to a higher road
Edward Moya, senior market analyst at OANDA brokerage firm, comments on gold forecasts:
Gold attracts a wide range of investors seeking protection as they are aware that there will be no quick fix to this (Russian-Ukrainian) situation. Gold has a higher path. However, there will be some moments when it will be sold out due to more aggressive Fed tightening expectations.
US Secretary of State Antony Blinken said on Wednesday that Russia had moved critical units closer to the Ukrainian border, despite Moscow’s insistence on withdrawing them. Increasing geopolitical tensions and expectations of US interest rate hikes suppressed the sentiment in financial markets, prompting investors to seek safe havens such as gold.
“After the interest rate increase, gold will fall, but there will be no collapse”
Data released Wednesday showed US retail sales rebound sharply in January, but higher prices could blunt the impact on economic growth this quarter. According to a Reuters poll, the Fed will start a tightening cycle in March with a 25 basis point increase in the overnight benchmark rate. Natixis analyst Bernard Dahdah estimates:
If the Fed starts raising rates and it’s faster than expected, we’ll see gold fall, but I don’t see a crash.
Russian-backed separatists in eastern Ukraine on Thursday accused government forces of having opened fire on their territory four times in the past 24 hours. It is not yet clear how serious the events are. Nicholas Frappell, global managing director of ABC Bullion, says the market is really sensitive to the news flow around the geopolitics of Ukraine and Russia.
Gold predictions by Brian Lan, general manager of GoldSilver Central
The U.S. dollar, meanwhile, retreated as news of the attack worried investors of a broader battle for security. Gold, on the other hand, was also bolstered by the minutes of the Fed’s meeting last month implying that the US central bank’s tightening policy will not be as aggressive as feared. The gold predictions of Brian Lan, general manager of GoldSilver Central dealership, are as follows:
Gold seems to be range-bound between $1,845 and $1,880. The yellow metal will stay here until geopolitical tensions ease a bit or the Fed makes the commitment that they really cut down on liquidity and try to raise interest rates faster.
But Brian Lan warns that with high inflation, “even if they raise interest rates, real interest rates will still be largely negative.” That’s why, after the initial reaction to a rate hike, investors will realize that gold is still a good asset to hold in this environment.
Pablo Piovano: Gold seeks a $1,900 test
Open interest on gold futures markets restarted the uptrend and more than 9,000 contracts were up on Wednesday, according to the latest data from CME Group. Instead, volume has shrunk for the third session in a row, now with around 74.7k contracts.
Gold prices reversed Tuesday’s strong slide and continued their upward move on Thursday, breaking past the $1,880 area amid rising open interest. However, market analyst Pablo Piovano states that a continuation of the initially bullish trend towards the $1,900 mark remains a tangible possibility in the very near term.
