The gold price recovered from its earlier lows during Friday sessions, but sentiment surrounding the yellow metal remained poor as it continued to trade under $1,100 per ounce.
Spot gold was last at $1,082.90/1,083.70, but off the fresh five year lows it hit earlier when gold tumbled to just $1,077.50.
But there many analysts in the market who still believe that gold prices will rise. On the other side there are some who believe that gold will no longer be accepted as a commodity or a currency.
The current volatility has created new waves in the market that has disowned gold from many investors list. Let’s view the reasons behind the bull v/s bear sentiment.
U.S. – better-than-expected US jobs data sparked the move lower. After an optimistic US weekly unemployment reading was released, market participants wondered how that would affect next week’s Federal Open Market Committee (FOMC) meeting. Further hints that the Fed is on track for a September rate hike could present downside risks for gold especially given current momentum.
China- Chinese Caixin Flash China General Manufacturing PMI came out at 48.2 against a forecast of 49.8. The number was below the psychologically important 50 level for the first time in 15 months. This created disappointment in the market for gold.
Eurozone- in the Eurozone, EU flash services number disappointed at 53.8, though the manufacturing number was as expected at 53.8. EU flashes services number disappointed at 53.8, though the manufacturing number was as expected at 53.8.
Although there is improving market sentiment among some analysts who say gold is oversold and are expecting to see a modest technical rally, there is still a strong bearish undertone among retail investors.
- Gold has fallen by 7.9 percent year-to-date compared with base metals, which in aggregate are down 15.6 percent and energy commodities which in aggregate are down 9.7 percent
- Even though gold is down this year, it remains a relative outperformer against the bulk of commodities
- Expectations that further data coming in from US maybe under expectations, which again sends positive signals for gold.
Next week, the focus will be on the FOMC meeting – further hints that the Fed is on track for a September rate hike could present downside risks for gold especially given current momentum.
Investors are bailing on gold on expectations the Federal Reserve will soon raise interest rates as the economy strengthens.
All eyes will be on the Federal Reserve, the U.S. dollar and economic data next week; and, according to analysts, any weakness could be positive for the gold market