The fall in real rates in the United States supported gold in recent days and the next big thing for the metal is Friday’s payroll report, UBS analyst Giovanni Staunovo said.
However, he added that the new increases in interest rates by the Federal Reserve and the drop in inflation should weigh on prices in the next six months.
Gold has shown encouraging strength holding in the upper end of $1,700 from the US gross domestic product reading for the second quarter, which on Friday put the economy technically in recession.
For its part, the precious metal rose 2.2% last week for its best weekly performance in four months after the chairman of the Federal Reserve, Jerome Powellsaid the central bank could not predict whether to maintain the aggressive rate hikes it had carried out since March to fight inflation, as the US economy itself was slowing.
Also, Gold’s rise this week was also helped by Chinese factory activitywhich contracted in July in the face of a new round of COVID-related lockdown measures.
China is the world’s second largest economy and a prolonged economic slowdown in that country is likely to weigh on global growth. The official Beijing Purchasing Managers’ Index fell to 49.0 points in July, indicating a contraction from 50.2 the previous month.
Gold Forecasts
According to analysts, the commodity could continue its upward path. “Most likely to hit $1,830, before a cap appears”said Sunil Kumar Dixit, chief technical strategist at skcharting.com.
“The completely noiseless weekly chart for gold shows no significant resistance ahead of the 100-week SMA of $1,830, which is very close to the 38.2% Fibonacci level.”
Dixit, which uses the spot price of gold to craft its outlook, has said that the precious metal’s weekly Relative Indicator has rallied from 32 to 43, while its 40/29 stochastic continues to cross higher for the third week in a row.
Rates and the dollar fall
The return on 10-year notes hit a four-month low, reducing the opportunity cost of holding bullion, which does not earn interest, while The dollar index stabilized after hitting a four-week low.
Gold has recently benefited from a series of disappointing economic data, as a survey on Monday showed factories in the US, Europe and Asia struggled to gain momentum last month.
Traders are also on the lookout for a possible escalation of the tension between China and the United Statess, as the Speaker of the House of Representatives, Nancy Pelosi, will begin a visit to Taiwan despite Beijing’s objections.
In other precious metals, spot silver fell 0.8% to $20.21 an ounce, halting a five-day rally; platinum up 1% to $910.95; and palladium fell 4.6% to $2,097.27.
Source: Ambito
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