The past
week in the gold market
was significantly shaped by the Federal Reserve’s cautious approach to interest
rate cuts. Federal Reserve speakers, including Fed Governor Christopher Waller
and Fed Governor Lisa Cook, emphasized the need for more evidence of cooling
inflation before considering rate reductions.
Gold prices were set for a weekly gain on Friday,
buoyed by a softer dollar and safe-haven demand from escalating tensions in the Middle East even as US Federal Reserve officials bruised the hopes of early rate cuts this
year.
Currently gold faces a major threat
from inflation data. There is a lot of speculation in the market which has pushed
investors towards safety buying. Markets even speculate that rate cuts might
come soon- probably June or September.
Though gold
prices remained range-bound as U.S equities performed well, it’s the risk-on
environment here versus flight-to-safety buying.
There are
key economic numbers and important data sets to be released this week. Investors
remain focused on these indicators as they will play a crucial role in influencing
gold prices-
·
new
home sales on Monday,
·
durable
goods orders and consumer confidence on Tuesday,
·
Preliminary
Q4 US GDP On Wednesday
·
pending
home sales on Thursday
·
PCE
price index on Thursday
·
ISM
manufacturing PMI on Friday.
Several
Fed officials are also set to speak later this week and are expected to
largely reiterate the bank’s outlook for higher-for-longer rates, amid concerns
over high inflation.
Beyond the
PCE data, a second reading on fourth-quarter gross domestic product is
also due this week and is expected to show some cooling in U.S. economic
growth. But not to an extent that warrants early interest rate cuts.
Higher-for-longer
rates bode poorly for gold prices, given that they increase the opportunity
cost of investing in the yellow metal.
As we know
the current market has a host of events lined up for gold, but there are some
major Drivers in the current year that will play a key role in pushing gold prices high. We say
this owing to the bullish sentiments in the markets and the major events that
are lined up-
·
Geopolitical issues out there that could
drive it higher.
·
DroppingInterest rates d should drive it
higher
·
WeakeningUS dollar.
·
U.S Elections
But a majorlong-terminfluencer for gold will be its
global demand. Central
bank purchases are strong and geopolitical tensions are high. Gold buying by central
banks — particularly from China and India — have helped offset money flowing
out of gold
exchange-traded funds. Those purchases have been driven in part by geopolitical tensions, such as Russia’s invasion of
Ukraine, and the Covid pandemic.
Key to
gold’s current popularity is China’s lacklustre post-Covid recovery, which is
hitting young people especially hard as youth unemployment soars and
traditional investment options such as property suffer, analysts say. Gold
prices are poised to rise as central banks purchase the precious metal and as
strong retail demand in emerging markets bolsters prices.
The yellow metal is forecast to climb about 6% in the
next 12 months to $2,175 a troy ounce. Gold prices can be seen hitting
$2,210 an ounce by the fourth quarter of this year, reaching a new all-time
high