FUNDAMENTAL ANALYSIS : GOLD - Analysis the mixed sentiment
April 17, 2023: Gold prices rose above $2,000 ahead of the release of inflation data. Gold is considered a safe haven and a hedge against inflation, so higher-than-expected inflation numbers could lead to increased volatility in gold prices. However, if elevated price pressures result in more interest rate hikes, it could reduce the appeal of gold as a non-yielding asset.
May 17, 2023: Gold prices slumped as President Joe Biden and Congress leaders failed to reach a consensus on raising the debt limit, raising concerns about a potential default. The uncertainty surrounding the debt ceiling negatively impacted gold prices, leading to a 1.5% drop below $2,000 per troy ounce. The depletion of Treasury coffers and the possibility of a no-deal scenario caused some investors to consider gold as a safe-haven asset.
May 29, 2023: The sentiment on gold was dampened by a tentative deal to suspend the U.S. debt ceiling and concerns about higher interest rates. The announcement of the deal to suspend the debt ceiling until Jan. 1, 2025, reduced the appeal of gold as a safe-haven asset. Additionally, the increase in U.S. consumer spending and inflation raised the likelihood of a 25-basis-point interest rate hike by the U.S. central bank in June, further dampening gold prices. The U.S. dollar index was near a two-month peak, making gold more affordable for overseas buyers.
8 hours ago (May 29, 2023): Gold and silver prices recorded a hike on the Multi Commodity Exchange (MCX) on May 29. Gold futures and silver futures witnessed increases in their prices. The prices of gold and silver had also risen when the market closed on May 26.
Current gold price: The current gold price stands at $1948.05 USD.
Analysis of the sentiment on gold:
The sentiment on gold appears to be mixed, with some factors pointing towards a bearish sentiment and others indicating a more bullish outlook.
Bearish factors:
The tentative deal to suspend the U.S. debt ceiling reduces the appeal of gold as a safe-haven asset.
Expectations of higher interest rates, indicated by the likelihood of a 25-basis-point hike in June, dampen gold's attractiveness as it offers no yield of its own.
The recent slump in gold prices below $2,000 due to the failure to reach a consensus on raising the debt limit and concerns about a potential default.
Bullish factors:
Gold and silver prices recording a hike on the Multi Commodity Exchange (MCX) indicate some positive momentum in the market.
The anticipation of US inflation data and the role of gold as a hedge against inflation may provide support for higher gold prices.
The potential inflection point and the possibility of gold bouncing off an ascending trend line may suggest a bullish sentiment.
Conclusion
Considering these factors, the sentiment on gold appears to be more bearish in the short term due to the impact of the debt ceiling discussions and the potential for higher interest rates. However, the bullish factors, such as the role of gold as an inflation hedge and the recent positive movement in gold prices, suggest a more optimistic outlook in the longer term.
My technical analysis based on this information is available in related ideas below
May 17, 2023: Gold prices slumped as President Joe Biden and Congress leaders failed to reach a consensus on raising the debt limit, raising concerns about a potential default. The uncertainty surrounding the debt ceiling negatively impacted gold prices, leading to a 1.5% drop below $2,000 per troy ounce. The depletion of Treasury coffers and the possibility of a no-deal scenario caused some investors to consider gold as a safe-haven asset.
May 29, 2023: The sentiment on gold was dampened by a tentative deal to suspend the U.S. debt ceiling and concerns about higher interest rates. The announcement of the deal to suspend the debt ceiling until Jan. 1, 2025, reduced the appeal of gold as a safe-haven asset. Additionally, the increase in U.S. consumer spending and inflation raised the likelihood of a 25-basis-point interest rate hike by the U.S. central bank in June, further dampening gold prices. The U.S. dollar index was near a two-month peak, making gold more affordable for overseas buyers.
8 hours ago (May 29, 2023): Gold and silver prices recorded a hike on the Multi Commodity Exchange (MCX) on May 29. Gold futures and silver futures witnessed increases in their prices. The prices of gold and silver had also risen when the market closed on May 26.
Current gold price: The current gold price stands at $1948.05 USD.
Analysis of the sentiment on gold:
The sentiment on gold appears to be mixed, with some factors pointing towards a bearish sentiment and others indicating a more bullish outlook.
Bearish factors:
The tentative deal to suspend the U.S. debt ceiling reduces the appeal of gold as a safe-haven asset.
Expectations of higher interest rates, indicated by the likelihood of a 25-basis-point hike in June, dampen gold's attractiveness as it offers no yield of its own.
The recent slump in gold prices below $2,000 due to the failure to reach a consensus on raising the debt limit and concerns about a potential default.
Bullish factors:
Gold and silver prices recording a hike on the Multi Commodity Exchange (MCX) indicate some positive momentum in the market.
The anticipation of US inflation data and the role of gold as a hedge against inflation may provide support for higher gold prices.
The potential inflection point and the possibility of gold bouncing off an ascending trend line may suggest a bullish sentiment.
Conclusion
Considering these factors, the sentiment on gold appears to be more bearish in the short term due to the impact of the debt ceiling discussions and the potential for higher interest rates. However, the bullish factors, such as the role of gold as an inflation hedge and the recent positive movement in gold prices, suggest a more optimistic outlook in the longer term.
My technical analysis based on this information is available in related ideas below
C Nicholas Downie
