The gold price rose on Friday as distressing US economic data revived interest in the safe-haven metal. But bullion is about to record its first monthly decline since January as the Federal Reserve prepares for aggressive rate hikes.
Edward Moya: Gold strengthens as the dollar continues to rally
As we covered in news on cryptokoin.com , the expensive metal is struggling with the headwinds provided by the US dollar. is doing. OANDA senior market analyst Edward Moya says gold strengthens as the dollar continues to rally on expectations of a Fed rate hike.
A stronger dollar makes it more valuable for users of other currencies to purchase dollar-priced goods. In the midst of this, investors are also preparing for a potential 50 basis point rate hike at the Fed’s next policy meeting on May 3 and 4, and for faster rate hikes later this year. Edward Moya has this to say on the Fed’s stance:
The Fed will probably be very aggressive in the next few meetings. The question is, will this stand be three meetings or four?
Edward Moya, China’s zero-COVID stance and Russia’s escalation of its war in Ukraine, including its decision to halt gas exports to Poland and Bulgaria, are also safe port assets. records that you keep it in focus.
US contracted, yellow metal rose
Gold fell by 1.2% on Friday following data showing that the US economy contracted in the first quarter and the dollar was at high levels against its major rivals. It rose above the $1,920 border.
The US economy contracted by 1.4% YoY in the first quarter. But the decline was largely driven by a record international trade deficit, lower government spending and declining stocks, while strong consumer spending and business investment signaled that the economy is still growing steadily.
On Thursday, the World Gold Board announced that gold demand increased by 34% in the first quarter compared to the same period last year, driven by strong ETF inflows. According to the quarterly report of the Board, gold price increased by 8% quarter-on-quarter, while demand excluding over-the-counter activity rose to 1,234 tons, reaching its highest level since the fourth quarter of 2018 and 19% above the five-year average of 1,039 tons.
Ilya Spivak: I do not expect these movements to continue.”
Currency strategist Ilya Spivak at DailyFX says the disappointing US GDP numbers may somewhat lift the pressure to tighten as aggressively as the Fed implies. The strategist makes the following assessment:
This was a lifeline to gold for a while and pulled the dollar back a bit. However, I do not expect these movements to continue.
Fed officials have rallied around plans to accelerate rate hikes this year, but are divided over where to stand as an “all or nothing” decision to avoid pushing the economy into recession.
Matt Simpson: When that happens, it could bode well for gold
Gold prices, the first-month percent since January, as the dollar and US 10-year Treasury yields strengthened this month. headed for decline. Matt Simpson, senior market analyst at trade firm City Index, highlights in a note:
The freight train, also known as the US dollar, will have to slow down at some point. And when that happens, it could be a neat sign for gold.
Gold demand at the top of 3 years
To Commerzbank economists who evaluated the World Gold Council’s (WGC) report on gold demand trends in the first quarter According to the data, the information shows high gold demand in the first quarter thanks to strong investment demand that will remain in place for the rest of the year. Economists value the data as follows:
Global gold demand increased by 34% compared to the same period of the previous year and reached 1,234 tons, reaching its highest level since the fourth quarter of 2018. This increase was driven solely by strong investment demand, which tripled the previous year to 551 tons. This can be attributed to the high demand for ETFs in the middle of the Ukraine war and the spike in inflation.
“Central banks will continue to be net gold buyers this year”
As long as geopolitical uncertainties and high inflation environment continue, WGC forecasts strong investment demand this year. Jewelery demand is expected to remain broadly stable.
According to economists, quarantine measures in China will prevent it from returning to the average levels seen in the past as it causes consumer demand in China to fall. In addition, economists state that central banks will continue to be net gold buyers this year, albeit at a lower level.