Gold prices were set for a second quarter decline on Thursday as the US Federal Reserve’s prospect of reducing pandemic-era stimulus strengthened the dollar and made bullion more expensive for holders of other currencies, according to market analyst Nakul Iyer. Spot gold partially recovered from the August 9 low of $1,720.49 touched in the previous session, up 0.2% to $1,729.56 at the time of writing. U.S. gold futures rose 0.4% to $1,729.20. Comments on different analisdollarserine gold fiadollaryellow Cryptocoin. com we have compiled for you.
Michael Langford: Gold has no direction in the short term
“Unlike gold, the primary hedge against most risk is dollars, but gold has no direction in the short term as it differs between monetary asset classes,” commented Michael Langford, AirGuide director of corporate consulting.
Expectations that the Fed may withdraw k support kept the dollar index close to a one-year high. Rising US bond yields contributed to the currency’s strength. The benchmark US 10-year Treasury rates, which deepened the troubles of safe-haven gold, rose above 1.5%, a level not seen since the end of June. Meanwhile, two Federal Reserve officials said Wednesday they are in favor of the central bank starting to cut back on asset purchases this year. Decreased central bank incentives and rate hikes tend to push government bond yields even higher, raising the opportunity cost of holding non-interest-bearing gold.
“It is not rising bond yields and risk aversion that drives the gold price down”
DailyFX foreign exchange strategist Ilya Spivak comments, “While there are many risks that could help gold rise, such as weaker data or the potential spillover of the Evergrande debt crisis, they are unlikely to provide lasting support.”
Also, we’ve been seeing the gold price and the stock dollar series fall together lately. We emphasize that gold does not act as a shelter against losses in riskier assets. Because it’s not rising bond yields and risk aversion that really drives these assets down.
FXTM head of market analysis Lukman Otunuga commented: “The precious metal is likely to weaken further amid a stronger dollar.”
However, the outlook may be affected by the Federal Reserve’s preferred inflation indicator, the core personal consumption expenditures price index, to be released on Friday.
David Russell: Fed cornered, gold and silver may break up once again
GoldCore director of marketing, David Russell, said in a statement that the central bank has so far acknowledged “continuing inflationary pressures” that support its shrinking narrative, emphasizing the following:
Increasing the tapering in the program, even the increase in the tapering narrative, kept gold and silver relatively bullish and still vulnerable to the downside in the short term. In the short-term, further downside movements in metals can be expected or stock markets react negatively to it.
On the other hand, David Russell notes that the realization that the Fed has cornered itself and that there really is little scope for any meaningful tapering could cause gold and silver to break higher once again.
“Gold and silver prices were hit by the yellow rebound and 10-year interest rates hike,” Kinesis Money analyst Carlo Alberto De Casa wrote in a daily note. Carlo Alberto De Casa states that the movements in precious metals are due to the perception that the current inflation will not be as temporary as the central banks had predicted in the last few months, and draws attention to the following point:
This scenario will likely force the Federal Reserve to begin tapering (the process of reducing liquidity in the system) as soon as November.