Fundamental Forecast for Gold: Neutral
Talking Points:
- Gold prices[1] has its 1st weekly decline since March
- Rising expectations for 3 more rate hikes and easing geopolitical tensions weigh on prices.
- Focus next week will be on US GDP and Trade Balance.
Still no sign a breakout for Gold with prices inching lower by 0.5% for the week, marking the 1st weekly decline since late March. Renewed buying for the DXY[2] as US treasury yields pick and easing geopolitical tensions see the precious metal failing to hold above $1350 yet again in what has been another rangebound week.
The recovery in the USD-index has begun to pick up the pace, testing the psychological 90.00 level amid the rise in US treasury yields with the 10Y hitting highs of 2.94%, subsequently denting the appeal of the non-interest yielding bullion. The continued rise in global commodity price index (led by oil[3] and aluminum), alongside rising price pressures (Philly Fed prices paid highest since 2011) in the US economy have thus raised inflation expectations, consequently steepening the priced-in Federal Reserve rate hike view. According to the latest CME FedWatch, markets are pricing in a near 44% chance of a further 3 rate hikes by the end of the year.
Source: CME
Easing geopolitical tensions sapped demand from the safe-haven asset with newsflow regarding the latest in Syria on the quiet side, while reports that North Korea are willing to listen to calls of denuclearization on the Korean Peninsula.
Next week’s Economic Calendar
Given that we enter the blackout period meaning that no Federal Reserve members will be
