An energetic week, gold rose in the USD slide

Last Wednesday, gold price recorded a two-week low as investors looked to the precious metal as a safe-haven amid fears of a rise in inflation mainly driven by rising fuel prices, despite a stronger dollar. and interest rates are controlled.

However, on Thursday, the price of gold suddenly turned to increase 0.3%, equivalent to 1,850.84 USD/ounce, as the greenback was supported by US Treasury bond interest rates falling slightly. US gold futures also rose 0.3 percent to $1,855.00.

The rally peaked on the last day of the week, supported by a lower dollar, which also put bullion on a third straight gain for the week, to $1,871.69 an ounce, its highest level since May 9th. As such, gold prices are up about 1% this week and US gold futures are up 0.3% to $1,875.90.

The ADP National Employment Report data showed that US jobs increased by 128,000 compared to a forecast of 300,000. The Fed is trying to reduce labor demand and curb high inflation, so the Fed has not pushed the unemployment rate too high.

“All factors point towards a forecast that inflation will continue and the Fed may not be addressing this as aggressively as they expect,” said Bob Haberkorn, senior market strategist at RJO Futures. due to the declining number of jobs”.

Fed Vice Chair, Lael Brainard, said on Thursday she is in favor of at least a couple of half a percentage point rate hikes if price pressures do not ease. While bullion is seen as a safe haven amid political and economic uncertainty, higher interest rates increase the opportunity cost of holding gold, which is inherently unprofitable. The dollar was steady after falling about 0.8% on Thursday, while the benchmark US 10-year yield rose.

Investors will keep an eye on U.S. nonfarm payrolls data and signal the pace of monetary policy tightening by the Federal Reserve in the second half of the year. Signs of a tightening labor market could give the Fed a foot in the air to cool down rates.

“A break above $1,860 on Thursday could be seen as a positive signal for gold,” said Carlo Alberto De Casa, market analyst at Kinesis.

“Many investors still believe that, although central banks fear inflation, they are also scared of a US recession, so they will be cautious before raising rates,” he said.

He and his team see gold’s recent lows as similar to the April-May 2009 consolidation following the global financial crisis. It is similar to the consolidation in January 2013 before the 34% price drop that ended in December 2015.

The fundamental difference between now and then is that the Fed is now starting a new round of quantitative tightening, raising interest rates, while fighting inflation. In both previous examples, the Fed has aggressively turned to quantitative easing, attempting to support the recovery of the US and global economies.

Ngoc Cuong

US stocks wobble, USD weakens, gold ends 4 weeks of deep declineDue to the volatility of many other investment channels plus the Fed’s monetary policy, investors’ cash flow into gold was not strong enough, the supply and demand in the gold market became unstable during the week, causing the gold price to fluctuate.