Gold Suffers 4th Consecutive Weekly Loss Amidst Directionless Trading

Gold Suffers 4th Consecutive Weekly Loss Amidst Directionless Trading

February 26, 2023 0 By Wiley McDermott

Gold carries forward its poor performance as its price sees another slip.

The commodity’s poor performance continues for the fourth consecutive week. As the result, the financial outlook for the commodities market becomes further intense.

In contrast to Gold prices, the U.S. Dollar sees further momentum and a positive upward trend regarding its price. This has made the situation further worse for Gold.

Economic indicators such as high policy rates, inflation fears, and talk of an upcoming recession, all these indicators have created a positive environment for U.S. Dollar to thrive.

The United States Federal Reserve’s professionals in their recent meeting unanimously said that they might increase the interest rate for an extended duration of time.

The Situation Has Transformed Miserably For Gold

Just a month ago, experts all across Wall Street were voicing that Gold to hit the $2k mark by the end of this month.

But now, there is uncertainty among many individuals about maintaining the yellow metal’s support at the $1,800 level.

Long-term investors who held gold futures experienced losses for the fourth consecutive week. This is due to the fact that traders lacked direction and remained mostly within the mid-$1,800 range.

For the month of March, Gold is expected to touch $1,817.10, meaning its price will be down by $9.70, which marks for 0.5% decline. The gold futures contract that serves as the standard for comparison experienced a decline of $23.30.

The current number represents a decrease of 1.3% over the course of the week. The financial outlook of the commodities market looks shaky and experts are afraid that its two years high range might come to end this year.

Currently, commodities traders look aimless and have no clue about the future price of Gold and other commodities.

What will be The Spot Price of Gold?

As compared to the futures market, a large number of investors are overseeing the spot price of Gold.

Whether the futures price offers a sustainable return, the spot price offers heavy returns on investment.

As the trading week ended on Friday, the spot price of gold was at $1,811.45. This shows the decrease in price by $10.86, 0.6%.

The core of the gold market is the fear that the metal could be used up due to inflation. Investors fear that the Feds will increase the interest rate, which would give U.S. Dollar momentum against the gold.

Gold has recently faced difficulties due to the PCE index: the inflation indicator favored by the Federal Reserve. The PCE Index experienced a growth of 5.4% in the month of January compared to the previous year.

On the flip side, the US dollar reached its highest level in seven weeks when compared to a group of significant currencies.

At the same time, the yields on the US 2-year Treasury note climbed to their highest point since 2007. All these financial outcomes are due to the Fed’s stance to continue to act hawkish regarding the monetary policy.

There is still a positive outlook for gold in the later part of the year, but there is a possibility of strong bearish momentum if the $1,800 level is breached.

As far as the consumer is concerned, people are still hopeful for strong spending power despite the fear of inflation.

Although wage growth is extremely high, soon the consumer can see a decline in their purchase power as fears of 2% inflation hit the market.

To control the rapidly increasing prices, the Federal Reserve has raised interest rates by 450 basis points through eight hikes since March. Although the current policy rate is at 25 basis points.

But, the interest rate could double as there is a growing demand for stricter regulation from the more conservative members of the central bank.

For Gold investors, things are about to go bad from worse for Gold and other commodities. It is wise for investors to wait until Feds make a clear decision about the future interest rates.