Gold prices under pressure, bleak outlook for next week

Many experts believe that the current environment is not favorable for gold prices in the short term, as the "sharks" of SPDR Gold Trust heavily sold gold this week...

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The global gold price has just completed a week of decline under pressure from the possibility of the US Federal Reserve (Fed) delaying the start of interest rate cuts. Many experts believe that the current environment is not favorable for gold prices in the short term, while the “sharks” of the SPDR Gold Trust have been selling gold strongly this week.

The spot gold price in the New York market ended Friday’s session (February 9) down $9.9/oz, equivalent to a decrease of nearly 0.5%, closing at $2,025.4/oz – according to data from Kitco exchange. This price is equivalent to about 60 million VND/tael if converted at the selling rate of USD at Vietcombank.

Throughout the week, gold prices fell by 0.8%. The downward pressure on gold prices this week comes from the USD exchange rate and the increase in US Treasury bond yields due to concerns that the Fed will keep interest rates higher for longer.

The 10-year US Treasury bond yield closed Friday’s session at nearly 4.18%, the highest in 2 weeks. The Dollar Index, a measure of the strength of the USD, ended the week near 104.1 points, up 0.15% for the week – according to data from MarketWatch. In the past month, the index has increased by more than 1.6%, bringing the total increase since the beginning of the year to more than 2.7%.

Analyst Everett Millman of Gainesville Coins believes that the Fed may keep interest rates higher for longer than the market has expected, and other major central banks will also act similarly to the Fed. “I believe that gold prices are facing disadvantages but are strongly supported around the $1,960/oz level. Prices are unlikely to fall below this level,” Millman told Reuters.

This week, there are many Fed officials speaking about monetary policy, including Fed Chairman Jerome Powell. All of these monetary policy planners have expressed their view that they want more evidence that inflation continues to decline before starting to cut interest rates.

According to the FedWatch Tool of the CME exchange, traders are betting that there is a 61% chance that the Fed will have its first interest rate cut in May. Many economists forecast that the Fed will only cut interest rates 2-3 times this year, instead of 5-6 times as recently expected by investors.

Gold price developments this week. Unit: USD/oz – Source: Trading Economics.

In a sign of the bleak prospects for gold prices in the short term, the largest gold exchange-traded fund (ETF) in the world, SPDR Gold Trust, has been selling gold during Friday’s trading session. It dumped 1.8 tons of gold, leaving the fund holding 841.9 tons of gold.

This week, this “shark” has had 3 selling sessions and only 1 buying session, with a total net selling volume of more than 10 tons of gold throughout the week.

Speaking to Kitco News, Naeem Aslam, Chief Investment Officer of Zaye Capital Markets, stated that it is clear that gold price momentum has exhausted its upward movement. He believes that if there are additional statistics proving that inflation is declining, gold prices could return to the $2,050/oz threshold, but for now, he does not see gold prices breaking out soon.

“Any sign that inflation is under control is enough to push gold prices back above $2,050/oz once again. But for now, it seems that the main trend of gold prices is downward, with a support level around $2,000/oz,” Aslam said.

James Stanley, a strategist at Forex.com, believes that gold prices are entering a consolidation trend. While remaining optimistic about the prospects for gold prices, he believes that prices need to fall below the $2,000/oz level to attract new investors and break out. According to Stanley, inflation in the US is still high compared to the Fed’s 2% target and the unemployment rate is low below 4%, so the Fed may not lower interest rates as soon and as rapidly as expected.

“This is not an environment where the Fed will easily cut interest rates, but they have said that interest rates will decrease this year. This keeps the USD exchange rate from rising strongly and gold prices maintain the $2,000/oz level. If gold prices correct, the demand for gold will increase. The main trend of gold prices will still be upward,” Stanley stated.

SOURCEvneconomy
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