Gold prices closed a volatile week when pressure from the high interest rate outlook of the US Federal Reserve (Fed) overwhelmed traditional supporting factors, causing many experts to continue to be cautious about the short-term trend of precious metals.
At the beginning of the week, spot gold prices rose sharply from the 4,210 USD/ounce range to over 4,300 USD/ounce thanks to safe-haven demand and expectations that cooling geopolitical tensions could pull oil prices down. The upward momentum continued until before the Fed policy meeting when gold prices at one point touched 4,381.83 USD/ounce - the highest level of the week.
However, the trend quickly reversed after the Fed kept interest rates unchanged but signaled a tougher stance on inflation. The US central bank said it remained open to raising interest rates in the near future if price pressure is not controlled.
The USD and US bond yields simultaneously increased after the meeting, putting pressure on gold. Spot gold prices then fell sharply to around 4,200 USD/ounce, at one point hitting the week's lowest level of 4,201.14 USD/ounce.
According to Kitco News' weekly gold survey, Wall Street sentiment has shifted to negative after the Fed meeting.
Mr. Adrian Day - Chairman of Adrian Day Asset Management - said that the market still needs more time to fully absorb the changes in the policy orientation of the Fed.
The messages from the recent Fed meeting surprised the market. Investors will need more time to assess the impact of this change in the coming weeks," he said.
Meanwhile, Mr. Darin Newsom - Senior Analyst at Barchart.com - predicts gold may continue to weaken in the short term.
According to him, what is noteworthy now is the contrast between the buying activities of central banks and the selling trend from financial investors.
Central banks continue to buy gold, while many investors are selling it. This is a picture that has not changed recently," he said.
Mr. Kevin Grady - Chairman of Phoenix Futures and Options - also said that the market is lacking momentum to increase prices when liquidity and trading volume are maintained at a low level.
The 4,000 USD/ounce zone is still an important psychological support threshold for gold. However, if there is no strong enough buying force, the possibility of retesting this price zone is entirely possible" - he assessed.
Sharing the same view, Ms. Nicky Shiels - Head of Metal Strategy at MKS PAMP - believes that the recovery from the 4,000 USD/ounce zone may only be technical rather than signaling a trend reversal.
According to her, short-term price increases are likely to still face profit-taking pressure as the market is focusing on the Fed's interest rate outlook.
Mr. Alex Kuptsikevich - Senior Analyst at FxPro - also said that gold is at risk of continuing to return to testing the $4,000/ounce zone next week.
The recovery momentum after recent positive information has weakened as the Fed maintains a tough stance. Technically, the 4,000 USD/ounce zone is still an important milestone determining the next trend of gold," he said.
According to a Kitco survey, 70% of Wall Street experts predict gold prices will fall next week, only 10% believe prices will increase and 20% predict the market will move sideways.
In the opposite direction, individual investors still maintain relative optimism. In a Kitco online survey, 54% of participants expect gold prices to increase next week.
Experts believe that the developments of gold in the coming time will mainly depend on US economic data, especially PCE inflation and further signals from the Fed. In the context that the market is assessing the possibility of interest rates remaining at a higher level for longer, gold is likely to still face significant challenges in the short term.
