Gold is starting a new week of trading looking down rather than up as traders and investors try to work out the true health of the global economy as well as the Federal Reserve’s next step.
So far the US economy has proven resilient to both stubbornly high inflation and the interest rate hikes implemented to curb rising consumer prices, yet market confidence remains fragile with many still forecasting a looming recession in the world’s largest economy. This fragility is providing some residual support for gold and its haven qualities and slowing the price slide down towards $1,900 an ounce.
This week features a range of speeches from Fed officials and this should provide greater clarity on how likely the US central bank is to implement another hike in September or whether rates have now peaked. Recent comments so far have provided a mixed bag with Raphael Bostic and Austan Goolsbee supportive of a Fed pivot while Michelle Bowman talked of the possibility of another hike still being needed.
In this mixed environment, gold is likely to come under pressure with so much of its elevated price built around the expectation of Fed rates having peaked. The uncertainty around how long the positive sentiment on equities will prevail is likely to ensure gold slips in price rather than plunges but in the short-term, it looks likelier for gold to trade at $1,900 an ounce rather than $1,950.
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