Although gold prices have broken through short-term resistance levels, analysts are still cautious about the possibility of gold prices next week. As the ongoing conflict between Israel and Iran provides gold as a safe haven asset, price increases are driven by geopolitical events that prove they are often short-lived.
The conflict between Israel and Iran could keep gold above $3,400 an ounce, but it will not push prices higher without further escalation. We have seen many geopolitical events causing gold prices to increase temporarily over the past three years, but all have had difficulty maintaining high prices," said Ole Hansen, Head of Commodity Strategy at Saxo Bank.
Gold prices are currently outperforming the US dollar, which is struggling to attract cash flow to seek shelter.
Michele Schneider - Market Strategy Director at Market Gauge said investors should prepare for volatility next week as traders take a profit day from the recent price increase. However, she also said that despite the possibility of disruption, both gold and silver still maintain a long-term uptrend.
The story of the Middle East could trigger higher inflation and other negative issues. So we can reach a peak, but I don't predict a peak right now," she said.
Mr. Naeem Aslam - Investment Director at Zaye Capital Markets, noted that gold investors appear to be monitoring the situation and waiting after Israel carried out the initial airstrike on Friday.
Aslam stressed the importance of monitoring oil prices and Iran's ability to retaliate: "If Iran retaliates strongly, especially by threatening oil flows through the Hormuz Strait, skyrocketing crude oil prices could trigger a run into safe-haven assets, pushing gold prices higher as investors take precautions against geopolitical chaos and inflation risks.
Conversely, the gold rally could subside as demand for shelter weakens. Gold traders should now monitor Brent oil above $80 a barrel as a test for deeper chaos. If oil prices remain high, gold could be ready for another rally; otherwise, a quick correction is expected as tensions ease," he said.
Meanwhile, Mr. Michael Brown - Senior Research Strategist at Pepperstone, said he is still optimistic about gold, even as the current risk compensation begins to decrease. He said long-term structural factors still support higher gold prices.
Overnight developments once again highlight why gold deserves to be in portfolios as a hedge against the current uncertainty. I still like gold to increase from here, especially as reserve asset distributors continue to diversify their holdings, he said.
Economic data to watch next week
Monday: Empire State Production Survey, monetary policy meeting of the Bank of Japan.
Tuesday: US retail sales.
Wednesday: US weekly jobless claims, groundbreaking of US housing construction, US Federal Reserve monetary policy meeting.
Thursday: US market closed on Juneteenth, the Swiss National Bank's monetary policy meeting, and the Bank of England's monetary policy meeting.
Friday: Philly FED Production Survey.
