Gold prices have been all over the place for the past couple of weeks, hitting a 10-month low last week before rallying a little as the week drew to an end.
As economic conditions across the world continue to deteriorate, experts say that gold investors have been turning to the dollar as a safe haven, allowing it to breach the $1,800 per ounce crucial resistance. Experts believe several factors will continue influencing gold prices in the coming weeks, including the following:
Crude oil prices. Prices for crude oil have been on the rise across the world partly due to a refining capacity shortage and a ban on Russian oil. As America and its allies consider capping oil from Russia at $40 to $60 a barrel in a bid to reduce its revenue and hinder its war efforts in Ukraine, Sugandha Sachdeva, Religare Broking’s vice president of commodities and currency research, stated that crude oil movements will remain critical.
Dollar index. Sachdeva noted that the dollar index will be the most prominent determinant factor for gold prices this week. The dollar recently saw a slight resurgence, which increased its appeal as a safe haven and pressurized gold prices. If the dollar index continues its dramatic rise this week, this could increase the greenback’s safe-haven appeal and impact gold prices.
The Federal Reserve’s speech. With the cost of living steadily rising, the Fed has taken increasingly hawkish steps to forestall economic inflation. In mid-June, the Fed hiked its benchmark interest rate by 0.75 percentage points, the largest increase since 1994.
At the time, Fed chair Jerome Powell said that officials may have to raise the interest rate by 50 to 75 basis points during the July meeting. But with the Fed’s speech expected this week, there have been rumors that it may reverse its hawkish stance on interest rate hikes.
Anuj Gupta from IIFL Securities said that the upcoming speech is crucial for gold prices because it will give investors a clue of what to expect from the next U.S. Fed meeting.
U.S. Inflation data. Inflation rates in America reached 8.6% in May, surpassing most countries in the world. Factors such as supply chain constraints, trade barriers and higher food prices that drive inflation are also affecting most of the world.
Anuj Gupta, vice president of research at IIFL Securities, said that U.S. inflation data for June 2022 will impact gold prices, with disappointing data expected to cause a surge of dollar-based profit booking and upping gold prices, all to the benefit of sector actors such as Royal Gold Inc. (NASDAQ: RGLD) and their shareholders.
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