8 Analysts Warn: Gold Prices Could Drop To These Levels!

Gold prices fell to their lowest level since April 2020 on Friday as the relentless rally in US dollar and US Treasury yields and the Federal Reserve took a more aggressive stance to contain rising inflation. Analysts interpret the market and share gold claims.

“An unrelenting dollar strength will leave gold defenseless”

Spot gold fell 1.64% to $1,644 on Friday. US gold futures, on the other hand, were last traded at $1,655.60, down 1.5%. Bullion tumbled for a second week, down nearly 1.8%. Edward Moya, senior analyst at OANDA, comments:

Here we see a relentless dollar power. This will leave gold vulnerable in the short term. Economics is clearly heading into recession right. Hard landing risks rose. This situation continues to increase flows to the dollar, which is terrible news for gold.

“Precious metals will remain under pressure”

Koindeks.com As you follow, the dollar touched the highest level in 20 years. This, in turn, reduced the demand for dollar-priced bullion. In the middle, the benchmark 10-year rates jumped to the highest level since April 2010. “Therefore, it is likely that gold prices will see broadly sideways for the remainder of the year,” Fitch Solutions says in a note. Ole Hansen, head of commodity strategy at Saxo Bank, highlights the following in a note:

The renewed strength of the dollar is pushing gold down. Other semi-investment metals such as gold, silver and platinum will remain under pressure until the market hits its highest hawk.

“Gold prices real progress below $1,600”

Gold is considered a reliable investment during periods of political and financial uncertainty. Rising interest rates, on the other hand, reduce the attractiveness of the yellow metal as it does not bring interest. ANZ commodity strategist Soni Kumari interprets the current situation as follows:

While the war in Ukraine escalated, there were some reliable port purchases. In contrast, tight monetary policies provide a firm footing for both real interest rates and the dollar. Therefore, the relentless increase in interest rates continues to be a headwind for gold. CPI figures are expected to remain high. However, the Fed is determined to reduce inflation. We expect gold prices to drop below $1,620 and then below $1,600.

“The market digested the interest rate hike, we do not foresee a big decrease in gold”

Bombay Kedia Commodities manager Ajay Kedia expects prices to remain volatile in the near term as the market has already digested the 75bps rate hike. Therefore, it does not foresee a large decrease in prices. Kedia draws attention to the following levels:

We see $1,650 as a support and $1,720 as resistance. The expectation of a further increase in the interest rate ends the upward movements of gold.

“In this case, gold prices will skyrocket to surprising levels”

The actions of the major central banks have heightened the flurry of global calm. Gold prices are down nearly 20% from the $2,000 they saw in March. Clifford Bennett, chief economist at ACY Securities, comments:

The dominant trend in the head of global investors is the realization that the European and US economies are in serious trouble at the moment. If the situation starts to look more of an economic collapse, gold will skyrocket to surprising levels.

Gold in an environment of geopolitical and economic uncertainty

Gold failed to benefit from its heavenly position Friday in times of geopolitical and economic uncertainty. Rupert Rowling, market analyst at Kinesis Money, highlights the following in a note:

In the current macroeconomic environment, where interest rates are rising around the world and are likely to continue for several more months, the pressure gold is under means it’s hard to see how it can profit from the question of how much further the yellow metal will fall.

“This is a long-term positive sign for gold prices”

In the midst of this, some global central banks other than the Fed also raised interest rates this week, underscoring investors’ concerns about the economic outlook. According to Insignia Consultants research manager Chintan Karnani, gold’s inability to trade above $1,700 after the Fed meeting is due to a falling bias.

Still, Karnani points out that gold is stable in every currency except the US dollar. He notes that this is a long-term positive sign for the expensive metal. Along those lines, he says, if gold collapses, there will be ‘huge demand for gold’, midway between the $1,576 and $1,600 region. Karnani reminds us that the Indian festive period will start from Monday and continue until the end of October. So, he says, “The low gold price cheers up jewelers as demand is expected to be higher.”

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