Gold added 2% in price for the week, giving longs their first weekly profit in 5 years.
However, looking at the fact that the dollar can make a jump to its 20-year high, gold is in a risky position.
The dollar index posted its first weekly drop in 6 months, at 103.23 on Friday, nearly hitting a record 22-year high of 105.06, which was a week ago.
Also affecting the long positions on gold is the yield on the 10-year US Treasury, which has so far decreased to 2.79%, while in May it was 3.2%. The decline in bond yields was facilitated by expectations for US Fed rates, which in June and July will have restrictions of 0.5% each round. But yields may also rise as expectations for rates change frequently.
“The second half of the week has been kind to gold as the trepidation in financial markets has shifted slightly from the pace of monetary tightening to recession risks,” said Craig Erlam, analyst at online trading platform OANDA. “So rather than higher yields and a stronger dollar weighing on the yellow metal, we’ve seen investors pouring into safe havens which have lowered yields slightly and lifted gold.”
Gold futures for June on Comex rose 0.1% on the day, and fix a price of $1842.10 per ounce, while futures rose 1.9% or $34 for the week. Significant price volatility was noted last week, as on Monday there was a drop to $1,785, almost reaching a record low on January 28 at $1,779.70.
Gold futures for 1 month by TradingView
It’s not easy for analysts to predict whether gold will extend its rebound, in anticipation that Fed rates are already in the pie.
“Whether that will be sustained in this hiking environment will be interesting and ultimately depend on just how real and significant the economic fears are,” Craig Erlam said. “At the end of the day, rate hikes should lower demand but so should a recession. If the latter continues to be viewed as a likely outcome of the former, gold could see its fortunes improve further.”
Sunil Kumar Dixit, chief technical strategist skcharting.com confirms Erlam’s view.
Gold bulls should target the $1867 and $1892 levels next, which would be a validation for the 61.8% Fibonacci fibonacci level of $1,917,” said strategist. “But they should also beware that weakness below the $1,836-$1,825 support can negate the rebound and trigger downward pressure to $1,800-$1,780. The reaction to $1,850, when it comes, will be critically important.”
Latest News