World gold prices are forecast to continue to fluctuate strongly next week as investors shift their attention to a series of important US inflation data, a factor considered to be able to reshape the monetary policy expectations of the US Federal Reserve (Fed).
After a volatile trading week with a decrease of more than 4%, gold is facing an important test of its ability to maintain the psychological support zone around 4,300 USD/ounce.
Last week, the precious metals faced great pressure after the US Nonfarm Payrolls report showed the economy created 172,000 jobs in May, far exceeding market expectations. This data increased forecasts that the Fed may maintain high interest rates for longer, even not excluding the possibility of raising interest rates again if inflationary pressure persists.
Immediately after the jobs data, gold prices plummeted and at one point fell to around 4,311 USD/ounce - the lowest level in more than two months. Notably, gold also lost the 200-day moving average (MA200), a technical signal that investors consider a long-term trend measure.
Entering the new week, the focus of the market will be the US consumer price index (CPI) and the producer price index (PPI).
If inflation continues to remain high or exceed expectations, the possibility of the Fed maintaining a tough stance is likely to be strengthened, thereby continuing to put pressure on gold. In this scenario, many experts believe that gold may retest the support zone around 4,250 USD/ounce, even lower if selling pressure increases.
Conversely, if data shows that price pressure is cooling down, the market may start betting again on the prospect of the Fed easing monetary policy next year. This will be a supporting factor to help gold recover after the recent strong correction.
Mr. Ole Hansen - Head of Commodity Strategy at Saxo Bank once said that the March bottom around 4,099 USD/ounce is still an important support level in case market sentiment continues to worsen. Meanwhile, some technical experts believe that if the 4,500–4,530 USD/ounce zone is recovered, gold may gradually stabilize again in the short term.
Although the short-term outlook has become more cautious, many experts still do not believe that the gold market is entering a prolonged downward trend.
Foundation factors such as the central bank's demand for gold, global public debt pressure and the safe-haven role of gold in the context of geopolitical instability continue to be an important support for the precious metal.
Therefore, the current decrease is assessed by many opinions as a correction phase to consolidate a new price level rather than a sign that the long-term uptrend cycle of gold has ended.
