Gold price forecast: here’s what to expect for the remainder of the week

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on Jun 1, 2022
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  • Gold price has edged lower as the US dollar and Treasury yields rebound.
  • The range that has defined the metal's movements in recent sessions will remain crucial in the short term.
  • A strong greenback, Fed's hawkish stance, and improved risk sentiment remain key drivers in the market.

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Gold price has edged lower in Wednesday’s session; pushing it past the horizontal channel that has defined its movements over the past seven sessions. Even so, the aforementioned range, which is between $1,840.94 and $1,865.43 will remain a crucial one for the remainder of the week. As at the time of writing, it was at $1,833.39; down by 0.18%.

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What’s behind gold price movements?

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The improved sentiment is one of the forces that have been curbing gold price gains in recent sessions. On Friday, the PCE price index – the Fed’s preferred gauge of inflation – showed that price pressures have peaked. Subsequently, the stock market has extended its gains as the demand for safe havens eases. For instance, the Dow Jones hit an intraday high of $33,236.80 on Tuesday after dropping to a one-year low of $3,0622.66 about a week ago. Granted, it has since pulled back to $32,990.13 as at the time of writing.  S&P 500 also hit a four-week high of $4,170.20 earlier in the day.

Additionally, the US dollar remains a crucial force behind gold price movements. As is the case with other commodities, a strong greenback makes the precious metal more expensive for buyers holding other currencies.

The dollar index, which tracks the US dollar against a basket of six major currencies, is on a rebound for the second consecutive session after hitting a one-month low of $101.29 on Friday. At the same time, the Treasury yields have extended the weeks gains ; an aspect that has increased the opportunity cost of holding the non-yielding bullion. The benchmark 10-year yields is at 2.86% after dipping to 2.71% late last week.

In the second half of the week, investors will be keen on the US jobs report. In particular, the nonfarm payrolls numbers are scheduled for release on Friday. Analysts forecast a reading of 325,000; which is a decline from April’s 428,000.

The US labor market remains strong; an aspect that has supported the Fed’s hawkish stance. Following his meeting with the Fed Chair, President Biden stressed on the need to respect the central bank’s independence.  

Even so, he acknowledged the need to cool off the inflation that is at a four-decade high. While I expect gold price to remain above the psychologically crucial level of $1,800 in the short term, prospects of interest rate hikes, a strong US dollar, and an improved risk sentiment will continue to curb gold price gains for the remainder of the week.     

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