Commodity analysts hold a strong bullish sentiment towards gold in the long term, yet as the summer trading season begins, expectations for an immediate breakout rally remain tempered.
Gold, despite positive sentiment, finds itself constrained within a relatively narrow trading range. It has struggled to sustain gains above $2,350 per ounce, while maintaining support around the $2,300 mark. Recent trading activity has seen fluctuations, with August gold futures closing at $2,331.80 per ounce, reflecting a 0.7% decline from the previous week’s close.
Chantelle Schieven, Head of Research at Capitalight Research, warns investors to prepare for heightened volatility in the gold market. She attributes this volatility to typically lower liquidity in summer markets, compounded by ongoing uncertainty surrounding the Federal Reserve’s monetary policy decisions.
“Gold is currently in a state of uncertainty, reacting sensitively to economic data as market expectations regarding interest rates fluctuate,” Schieven remarked. “Every deviation from economic forecasts has the potential to sway interest rate expectations, thereby impacting gold prices.”
While the precious metal navigates these uncertainties, Schieven identifies a significant support level at approximately $2,280 per ounce. She anticipates that the Federal Reserve may opt for a rate cut in September to bolster economic growth amidst persistent inflationary pressures.
“The latest signals from the Federal Reserve indicate a shift in focus towards labor market conditions, which are showing signs of weakness,” Schieven noted. “This could prompt a rate cut after the summer, aiming to support economic activity.”
Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, shares a near-term outlook for gold supported by hedging strategies ahead of the summer vacation period. However, he cautions against expecting a breakout rally in the absence of significant developments from the Federal Open Market Committee (FOMC).
“We maintain a cautious stance on gold, predicting continued consolidation unless we witness substantial commentary from FOMC members,” Aslam stated.
David Morrison, Senior Market Analyst at Trade Nation, adopts a more optimistic view despite recent price consolidations. He observes constructive price movements in gold, attributing recent volatility to typical summer trading patterns and thinning trading volumes.
“Gold’s resilience around the $2,300 support level and stabilizing technical indicators suggest potential for upward momentum,” Morrison commented. “We anticipate heightened market gyrations as summer progresses, a typical prelude to significant market movements.”
In contrast, Barbara Lambrecht, Commodity Analyst at Commerzbank, holds a more cautious outlook due to the Federal Reserve’s reluctance to signal imminent rate cuts.
“With the Federal Reserve likely delaying rate cuts until year-end, further upside in gold prices may be limited,” Lambrecht cautioned. “Additionally, recent outflows from gold ETFs and speculative investors’ heightened long positions could trigger a correction in gold prices.”
Looking ahead, market analysts are eyeing upcoming economic data releases, particularly the Personal Consumption Expenditures (PCE) Index—a crucial inflation indicator favored by the Federal Reserve. Analysts speculate that weak inflation figures could bolster the case for a September rate cut, potentially supporting gold prices amid market uncertainties.
Overall, while the outlook for gold remains uncertain in the short term, analysts emphasize the importance of monitoring Federal Reserve policy signals and economic indicators as pivotal factors influencing gold’s price trajectory through the summer and beyond.
