Alex Kuptsikevich - senior market analyst at FxPro predicted that gold prices will decrease this week: "Gold is in a tug-of-war situation. Expectations of monetary policy easing are dragging US government bond yields down, thereby supporting gold prices. But efforts to promote peace plans for Ukraine are creating resistance to growth, he said.
Kuptsikevich noted that in the three years since the global gold rally began, gold prices have risen 170%, fueled by strong demand from emerging market central banks for physical gold, rather than the US dollar.
Rumors about Kevin Hassett being appointed as the Feds chairman have prompted the futures market to cut the final rate expected to 2.75%. At one or more FOMC meetings, borrowing costs can fall by 50 basis points. This has caused the US dollar and Treasury yields to fall, he added.
That creates a wind in the direction of gold, allowing UBS to forecast prices to increase to $4,500 by the end of 2026. Deutsche Bank also forecasts an average price of 4,450 USD/ounce. However, we still see the risk of depreciation, as many investors may want to take profits after the 48% increase since the beginning of the year, said Kuptsikevich.
We expect spot gold to fall to $4,040 an ounce by the end of next week, erasing last weeks gains.
According to the CME FedWatch tool, the market is pricing in more than 85% of the possibility of the Fed cutting interest rates in December.
Adrian Day - Chairman of Adrian Day Asset Management is also one of the experts who believes that gold prices will not increase this week. He said. Until the Federal Reserves December interest rate decision is made, gold prices are likely to hold their gains but are unlikely to break out higher.
The interest rate cut has been reflected in prices by the market, meaning the current risk is that the Fed will not cut. However, it appears that the bottom after gold peaked in October has formed and gold prices may move sideways before a new rally."
The world gold market operates through two main valuation mechanisms. The first is the spot delivery market, where prices are quoted for transactions and spot deliveries.
Second is the futures contract market, which sets prices for future deliveries. Due to year-end book-taking activities, December gold contracts are currently the most actively traded on CME.
Notable economic data for the week
Monday: ISM manufacturing PMI.
Wednesday: ADP employment data, ISM service PMI.
Thursday: US weekly jobless claims.
Friday: Core PCE index, University of Michigan preliminary consumer confidence survey.
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