World gold prices are facing a sensitive period when they are simultaneously affected by inflationary pressure, interest rate expectations and investor caution. In the short term, the risk of gold continuing to test the 4,000 USD/ounce zone is still present, but many experts believe that the long-term trend of the precious metal has not been broken.
Mr. Edward Meir - an analyst at Marex, said that the gold market is currently mainly dominated by interest rate expectations and the outlook for US monetary policy.
Investors will pay special attention to any signals indicating that the US Federal Reserve (Fed) may raise interest rates. If that scenario becomes clearer, gold prices could completely break through the $4,000/ounce mark," he said.
This concern appears in the context of newly released data showing that the US producer price index (PPI) in May increased more strongly than forecast, recording the highest annual growth rate in more than three years. This development increases inflationary pressure and strengthens expectations that the Fed may maintain a higher interest rate level for longer.
According to CME's FedWatch tool, the market is currently assessing about 60% of the Fed's ability to raise interest rates in December this year.
High interest rate environments often put pressure on gold because precious metals do not yield yields. As opportunity costs increase, cash flow tends to shift to better profitable assets, causing gold's short-term attractiveness to decline.
From the end of February to now, gold prices have adjusted by about 20% and at times retreated close to the 4,000 USD/ounce mark after breaking the 200-day moving average (MA200) - an important technical threshold often followed by long-term investors.
However, in the opposite direction, some experts believe that the current developments are still more technically adjusted than a signal that the gold price increase cycle has ended.
Mr. Thorsten Polleit - Honorary Professor of Economics at Bayreuth University and publisher of BOOM & BUST REPORT said that after a period of heating up to near 5,600 USD/ounce at the beginning of the year, gold's correction is not too surprising.
Although not excluding the possibility that gold will continue to test the area below 4,000 USD/ounce in the short term, Mr. Polleit assessed that the area around 3,900 USD/ounce may play a noteworthy supporting role.
The reasons for holding gold are still completely convincing," he emphasized, while saying he still maintains confidence in the long-term outlook for the precious metal.
According to this expert, the need to diversify assets, the role of gold in preserving value as well as the reserve trend of central banks continue to be fundamental factors supporting the market.
In the current context, analysts believe that gold may still fluctuate strongly in the short term in the face of economic data and monetary policy expectations. However, for many long-term investors, the current correction is still seen as a challenging phase rather than the end of the upward trend of precious metals.
