Gold prices have faced many storms in recent months as Iranian tensions have significantly disrupted the global energy market, pushed oil prices up and fueled inflationary fears.
Those concerns are quickly becoming reality after the US Federal Reserve (Fed) shifted from a loose trend to a "hawkish" stance, signaling the possibility of supporting interest rate hikes by the end of this year.
Mr. Fawad Razaqzada - Market Analyst at FOREX. com - said that price movements next week will be decisive to see if gold has really bottomed out or not.
Gold prices once fell below $4,000, but selling pressure was not strong enough to push prices further down. However, if the upcoming recovery continues to falter like previous times, this support level could completely be broken, pulling gold prices down sharply to $3,500 in the next few weeks.
Conversely, if it goes up, the March bottom of 4,098 USD/ounce will be the first resistance level to be overcome, followed by 4,200 USD/ounce" - this expert analyzed.
Despite the imminent downside risks, analysts believe that the current price level is opening up attractive long-term investment opportunities. Many opinions affirm that it is very unlikely that gold prices will be below the 4,000 USD/ounce mark for a long time.
They also noted that although buying power from central banks has slowed down, this is still an important support to help maintain a solid floor price for the market.
In addition, experts also question whether the Fed will actually raise interest rates, even when inflationary pressure is still high.
At this time, investors seem to be preparing mentally for a scenario: the Fed will raise interest rates this year," Mr. Fahad Tariq - Senior Vice President of Stock Research at Jefferies - stated his opinion in a report released on Friday. "However, as we have noted, it is likely that the Fed will temporarily'ignore' (look through) the oil price shock, especially when WTI oil has now fallen below 70 USD/barrel. It is very difficult for interest rates to continue to rise this year considering the political and fiscal consequences.
According to observers, job data released next week will be the "key" to revealing the next step of the Fed.
If the US jobs report on July 2nd yields positive results - especially when recruitment demand during the World Cup pushes real data higher than forecast - the Fed's "hawkish" stance will be further strengthened. If this increases the possibility of the Fed raising interest rates in July, gold may face a new sell-off plunging deep below the $4,000 mark," assessed Lukman Otunuga - Senior Market Analyst at FXTM.
In terms of technical analysis, if it stands firm above 4,000 USD/ounce, gold prices have a chance to return to the 4,100 USD/ounce and 4,250 USD/ounce levels. Conversely, if losing this important support level, sellers may push prices back to 3,900 USD/ounce and touch the 100-week SMA moving average at 3,740 USD/ounce" - this expert said.
