© Reuters
Investing.com – Updated at 11:11 GMT
Gold prices declined globally, with the spot gold price recording the level of $2,032 an ounce, a decline of 0.35%.
The decline came after reports of very strong US bank earnings, as the earnings report of JP Morgan Chase & Co. (NYSE:), one of the largest investment banks in the world, showed record profits due to the Federal Reserve raising interest rates. Wells Fargo’s report came in higher than expected.
This prompts an increase in risk appetite, indicating that the economic conditions are not as bad as expected, which resulted from the collapse of small regional banks that the market witnessed at the end of the first quarter of this year.
While the dollar index turned green, despite its decline to its lowest level this year, to record 100.705.
Gold prices turned downward, after they were in an upward range during these moments of trading, today, Friday, as it appears that there is selling pressure on the metal.
However, prices are set to gain for the second week in a row, coinciding with the decline in the US dollar and recent economic data raising bets that it is nearing the end of the lifting cycle.
Despite the declines that the precious metal is currently experiencing, gold is hovering near the highest level in a year, which it reached on Thursday.
Also read:
Gold and the dollar now
It fell 0.15% to $2,052.
It fell by 0.1%, at $2,038 an ounce.
While it decreased by 0.16%, to score 100.54 points.
Technical analysis
gold when settling yesterday
Gold prices rose at the settlement of transactions, yesterday, Thursday, after economic data increased expectations of an imminent halt to raising interest rates.
Upon settlement, gold futures for June delivery rose 1.5%, or $30.4, to $2,055.3 an ounce.
While spot contracts rose by 1.24% to $2039.7 an ounce.
What drives prices?
“The desire to sell the US dollar in the wake of weaker inflation data, lower yields and calls for a lower final interest rate has been a big driver for gold,” said Matt Simpson, senior market analyst at City Index.
It shows that markets are pricing in a 64.4% chance of a 25bp hike in May, with rate cuts in the other half of the year.
“This is a fundamentally positive environment for gold, with the Fed raising rates, yet overall inflation remains above target,” said David Meagher, director of metals trading at brokerage High Ridge Futures.
Gold is considered a hedge against inflation and economic uncertainty, but higher interest rates reduce the attractiveness of non-yielding bullion.
Important data this week
This week’s data showed that the producer price index in the United States in March fell by the most since April 2020, while the consumer price index rose less than expected.
Moreover, more Americans filed new claims for unemployment benefits than expected last week, indicating declining labor market conditions as higher borrowing costs dampened demand in the economy.
These readings, along with fears of a mild recession, have helped bullion gain around 1.7% so far this week.
“All eyes will be on consumer sentiment and inflation expectations today,” Simpson said, adding that gold could head towards an all-time high if the data is weak enough.
gold forecast
Ole Hansen, Head of Commodities Strategy at Saxo Bank, said his predictions for gold prices reaching $3,000 are becoming more and more feasible after recent market developments.
He added, “Central banks’ requests for gold are still strong as they are, and inflation is still high and far from the required low levels, which is in favor of gold’s rise.”
“Also, according to what we have seen in the past 20 years, the rise in interest rates in America has affected gold prices… and we may see a repeat of this,” Hansen said.
Since the beginning of the year, gold prices have witnessed a series of gains, rising above $2,000 an ounce, more than once this year.
