Gold prices fell to their lowest level in almost two weeks on Wednesday as higher yields on U.S. dollars and Treasury bonds continued to put pressure on bullion demand. What direction and levels do analysts’ forecasts for gold indicate? We have compiled it for our readers.
“The long squeeze of gold seems to be continuing”
As we reported on Somagnews, prices fell by 1.8% on Tuesday, as the strengthening of the dollar and the base rates on 10-year US treasuries overshadowed the influx of the precious metal as a safe haven. Jeffrey Halley, senior analyst at OANDA, comments:
The US dollar is still strong today, and the prolonged squeeze on gold in Asia seems to be continuing as China refuses to cut rates on its one- and five-year loans.
U.S. Treasury bond yields hovered near multi-year highs as investors prepared for aggressive interest rate hikes by the Federal Reserve. Gold is very susceptible to an increase in short-term interest rates in the United States and bond yields, which increases the opportunity cost of owning an interest-free bullion.
“Gold is between rising interest rates and inflation and geopolitical risks”
On Monday, gold approached the key level of $2,000, but has been under some pressure since then. UBS analysts note in a note that there are many hedging opportunities supporting the demand for gold, such as the war in Ukraine, a sharp rise in global inflation, the hawkish axis of the Fed, and then the yield of 2-year/10-year US Treasury bonds. inversion of the curve.
Fed President Louis James Bullard on Monday confirmed his proposal to raise interest rates to 3.5% by the end of the year to curb inflation. UBS analyst Giovanni Staunovo comments:
The hawkish comments of the Fed representatives put pressure on gold, raising nominal and real interest rates in the United States. Nevertheless, short-term high inflation and geopolitical risks are likely to continue to support the inflow of gold into products and keep gold prices at current levels in the coming weeks.
Philip Streible’s gold forecasts point to this level
Although gold is considered a safe means of saving during political and economic crises, as well as rising inflation, higher interest rates lead to an increase in the opportunity costs of storing non-refundable gold. Phillip Streble, chief market strategist at Blue Line Futures in Chicago, said:
In the near term, we may see some downward pullback. Gold may fall to $1,920. Gold is under pressure from real interest rates, which have turned positive for the first time in two years.
Gold forecasts from TD Securities economists
The prolonged war in Ukraine increases both geopolitical uncertainty and inflationary risks. According to a report by TD Securities economists, market concerns about the war in Ukraine and the continuing view that the US central bank is behind schedule remain factors supporting forecasts for gold. Economists give the following estimates:
The potential for a protracted war in Ukraine increases the demand for the yellow metal as a safe haven, while increasing geopolitical uncertainty and inflationary risks. This trend is also exacerbated by the simultaneous decline in global stock and bond prices, which is consistent with concerns that Treasury bonds may be less strong havens in a higher inflation regime.
While the Fed signals its intention to fight inflation by achieving political neutrality and initiating an aggressive QT (quantitative tightening) regime by the end of the year, exits from the gold markets were few, since respondents are satisfied that they have some option against the Fed’s stated plan. amid fears of growth, economists say.
Commerzbank: Gold remains solid
Gold was almost unchanged on Wednesday on the back of higher yields on US Treasury bonds and a strong dollar. According to a report by Commerzbank economists, the yellow metal also ignores the latest Fed notifications. Economists say:
Gold continues to hold up against the backdrop of a strong US dollar and high bond yields. Statements by representatives of the US Federal Reserve System do not seem to have any impact on gold at the moment.
ETF investors bought shares on the balance sheet last week. Gold ETFs tracked by Bloomberg have registered almost 16 tons of records. It was week 13 showing records. Since the beginning of the year, receipts have exceeded 273 tons. According to economists, this makes ETF investors the main driver of the gold price. Economists emphasize that:
CFTC data shows that speculative financial investors are betting more on the recent rise in gold prices. They completed a five-week pullback, increasing net long positions by 15% in the week to April 12.
