World gold prices enter the coming week in a sensitive state after just experiencing a week of sharp decline. Spot gold prices are currently around 4,494.11 USD/ounce, maintaining near lows for many weeks even though the market closed at the end of the week, amid pressure from a stronger USD, rising US bond yields and expectations of interest rates remaining high for longer. Reuters also said this is the third consecutive week of gold weakening, as the market is concerned that rising oil prices due to the Middle East conflict could heat up inflation again.
The focus of next week is likely still the interest rate problem. According to Reuters, the US Federal Reserve (Fed) has kept interest rates unchanged in its most recent meeting and signaled caution about the next time to cut. Fed Chairman Jerome Powell said that the level of uncertainty is currently very high due to the impact of the Iran war, while the market almost no longer expects the Fed to loosen strongly soon. For gold, this is a disadvantageous factor because high interest rates increase the cost of the opportunity to hold a non-performing asset.
Another variable that will continue to dominate gold prices next week is the USD. Reuters noted that the greenback has increased sharply in the past week and has become a more prominent safe haven than gold. As the USD increases, gold valued in USD becomes more expensive for investors holding other currencies, thereby putting downward pressure on prices. This is also the reason why gold does not fully play its safe haven role even though the US-Israel conflict with Iran has not shown signs of cooling down.
In the opposite direction, the possibility of technical recovery for gold next week has not been eliminated. According to the Wall Street survey, most experts still lean towards the scenario that gold prices will still be under pressure in the short term, but some opinions suggest that the market is falling into a state of oversold and may enter a recovery phase after the impact of monetary policy subsides. The article cites the view that the fundamentals of gold and silver have not changed too much in the past month, so if technical selling pressure weakens, the market may recover.
Overall, next week gold is likely to still move in a strong tug-of-war state around the current support zone. If the USD continues to anchor high and US bond yields maintain an upward trend, gold prices may continue to be under adjustment pressure. Conversely, in the event that the USD cools down or interest rates are expected to ease, the precious metal may experience a technical recovery. However, in the current context, the main trend in the short term is still leaning towards caution rather than optimism.
