Books – Islam Saeed
Saturday, June 10, 2023 12:43 PM
Gold was able to end last week’s trading on a high, to achieve the best weekly performance in 5 weeks. This comes in light of expectations that the Federal Reserve will fix interest rates during its next meeting, and the negative impact of this on the dollar contributed to the rise in gold prices.
rose gold prices The instant spot rose during the past week by 0.7%, to gain $13, and close the week’s trading at the level of $1960 an ounce, to close gold above the level of $1950 an ounce, which represents important support for gold prices, according to the technical analysis of Gold Billion.
Gold fell yesterday, Friday, after hitting the highest level last week at $1973 an ounce, in light of the return of the dollar to rise yesterday, which pushed gold to retreat within the range that dominated its trading during the past week.
Last week witnessed gold trading in a specific range without taking a clear direction, due to the markets’ readiness for the next most important week, during which the consumer price data, the inflation measure, and the Federal Reserve meeting will be released.
Last week witnessed the data of the Institute for Service Supply Index, which measures the performance of the services sector in the United States during the month of May. Level 50 is the difference between achieving growth and stagnation in the sector.
Last Thursday, the weekly unemployment claims data was released, recording the highest level in more than a year and a half, by 261 thousand applications, compared to the previous reading of 233 thousand and expectations of 236 thousand. This data helped raise bets that the Fed is on its way to fixing interest rates after it started to negatively affect the employment sector.
Signs of weakness in the performance of the US economy may force the Federal Reserve to stop raising interest rates during its next meeting, but the inflation data represented by the consumer price index, which will be issued next week, a day before the Fed meeting, will have a significant impact on the bank’s decision and in moving the markets.
Stabilizing interest rates is good news for the gold markets because it increases the attractiveness of the precious metal for investments that may leave the bond markets in favor of gold, according to Gold Billion, while weakness in the labor market, along with some decline in inflation, may lead to the Federal Reserve temporarily halting the cycle of raising interest rates. When meet this week. However, the latest government jobs report and personal consumption expenditures index beat expectations keeping uncertainty growing as to how the Fed will move.
Markets are currently pricing in a 72% chance that the Fed will hold rates at 5.25% at its next meeting, but the odds of a 25bp hike in July have increased to 67%.
Regardless of the Fed’s move next week, US interest rates are widely expected to remain elevated for much longer this year, capping any significant gains in gold prices. Higher interest rates lead to a higher opportunity cost of holding non-yielding assets such as gold.
However, on the other hand, we may find demand for gold returning later this year in the event of a slowdown in the US economy and a decline in growth rates.
2023-06-10 09:43:00
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