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Although Producer Price Index (PPI) report which was released Friday exceeded expectations, put some pressure on the precious metals market, the price of gold closed at $2,400 per ounce for the second consecutive week, just 1% away from its all-time high. Analysts believe that gold’s consolidation phase is coming to an end and that fresh all-time high is possible in the near future.
Robert Minter, director of ETF strategy at abrdn, said that the June CPI report showing a significant cooling of inflation, coupled with Powell’s dovish statement during his congressional testimony, are two factors that have fuelled the long-awaited rally in the gold market. With the labour market slowing down, the Fed needs to act now, and the CME FedWatch tool shows the market sees more than a 90% chance of a rate cut in September.
Naeem Aslam, chief investment strategist at Zaye Capital Markets, said that a rate cut in September is now a foregone conclusion. Although a number of important economic reports are due to be released next week, some market analysts do not expect the data to materially change market expectations, which will continue to support gold’s new momentum.
Commerzbank commodities analyst Carsten Fritsch also believes that gold will hit a new all-time high next week. He noted in a report on Friday that a rate cut in September is now almost a complete certainty, and there will be another rate cut before the end of the year. As a result, the price of gold could return to May’s all-time highs in the coming days.
Meanwhile, the market is also focusing on the European Central Bank’s interest rate decision next Thursday, which is expected to leave rates unchanged after a cut in June. Gold investment demand in Europe picked up last month, coinciding with the rate cut, the World Gold Council noted in a report this week.
FX Empire analyst James Hyerczyk said on Friday, as the U.S. inflation situation improves to boost market expectations of the Federal Reserve rate cut in September, gold ushered in the third consecutive week of gains, record highs may be refreshed at the end of the year.
The analyst pointed out that spot gold oscillated within yesterday’s wide range on Friday, with the technical pattern suggesting that investors are indecisive and volatility is imminent. Gold is still near its all-time high of $2,450.13 an ounce, well supported by its 50-day moving average of $2,347.49. Like the Fed, traders are now very dependent on economic data and volatility in the gold market could rise in the next few weeks.
