Gold prices are showing signs of resilience in this week’s trading, following a two week decline that saw $30 knocked off the precious metal’s value.
It is priced at $1,926 per ounce at 0721 BST this morning, consolidating yesterday evening’s gains – however prices are still at their lowest since March.
Prices dipped nine per cent since early May, however they are still closer to April’s $2,048 per ounce peak than September’s low of $1,618 per ounce before prices went on an upwards trajectory.
Consistent interest rate hikes from the hawkish US Federal Reserve to tame inflation has weighed down prices, but gloomy economic data has prevented gold from sliding further.
Gold is typically considered a safe haven asset, with investors embracing the metal during economic downturns.
Investors are now awaiting fresh signals, which could dictate the next major move in the market – either a rally or a price plunge.
Analysts expect gold prices to fall further, with central banks set to raise interest rates further over the coming weeks, which Craig Erlam, senior analyst at Oanda considered to be a “corrective move” rather than a sharp change in sentiment against the precious metal.
“Gold has struggled in recent weeks against the backdrop of persistent stubborn inflation, resilient economic data, and, as a result, higher interest rate expectations. We’re seeing it bounce back a little over the last couple of sessions after briefly dipping below $1,900 but the trend is still very much against it,” he said.
Rupert Rowling, market analyst at Kinesis Money argued that gold’s continued trading at elevated levels exposes “the lack of confidence investors have on the true health of the global economy and equities markets.”
The metals expert believed expectations of poor stock market performance in the US was helping gold prices remain robust.
He said: “This support however is only able to slow gold’s decline rather than keep it up indefinitely as the reality of another interest rate hike by the Federal Reserve expected later this month with the prospect of at least one more after it does reduce gold’s appeal.”
So far $1,900 has proven a strong support level for gold but if and when this threshold finally gets broken through, the price could drop significantly with the bearish factors comfortably outweighing the bullish ones.”