Although gold prices rose on support from the US recession and US-China tensions, they fell sharply as US jobs data came in ahead of expectations. Experts think that if the risks persist, the outlook is positive.
While gold prices rose last week as the US economy entered recession, they continued their gains this week, helped by US-China tensions.
The precious metal recouped last month’s loss by hitting $1795 levels over the course of the week. However, the rise was limited due to strong US nonfarm payrolls data.
Gold prices rose 2.2 percent last week as the US economy contracted for two consecutive quarters and slipped into recession and expectations that the Fed would slow rate hikes increased.
The visit of US House Speaker Nancy Pelosi this week to Taiwan, the disputed region despite warnings from China, highlighted gold’s safe haven characteristics. For example, an ounce of gold that closed at $1765 last week was trading at $1785 on the last trading day of this week.
GOLD WAVES AFTER EMPLOYMENT DATA
Then, July non-farm payrolls data from the US put the brakes on gold. Nonfarm payrolls in the US rose by 528,000 in July. Economists had expected an increase of 250,000.
While strong employment suggests the economy is still warm and that high inflation will persist, this data has greatly raised the possibility of a 75 basis point hike by the Fed. On the other hand, the Fed’s hawkish stance could strengthen the dollar and continue to suppress non-yielding assets like gold.
ŞAHİN SIGNAL FROM FED OFFICIALS
On the other hand, the decline in government bond yields and growing concerns about the economic crisis led investors to safe havens this week. Regional Fed officials said they see no sign of inflation slowing, that inflation should be brought down to the target level of 2 percent despite the economic slowdown, and that price stability is the top priority.
These comments were taken by the market as a signal that the dollar’s strength would continue and dampened gold’s rise. Experts believe that if risks in the economy persist, the prospects for gold will be positive in the medium and long term.
INCREASED RISK OF RESTRICTIONS
According to Commerzbank AG analyst Carsten Fritsch, the precious metal benefited from “a significant drop in real bond yields, which have fallen by around 40 basis points over the past two weeks”.
“For a time, real yields fell to their lowest level since late May and almost reached zero again,” Fritsch said in a memo cited by Bloomberg. “Furthermore, the state of the US yield curve also points to an increased risk of a recession,” he said.
“MEDIUM AND LONG-TERM OUTLOOK POSITIVE”
In the Yapı Kredi Daily Bulletin, it was noted that the positive viewpoint in the ISE experts’ gold comments will be maintained in the long and medium term. The following statements were included in the bulletin:
“US 10-year bond yields, which started the week on an uptrend, have the potential to enter a downtrend by mid-week and bode well for China-Taiwan relations. The short-term direction looks positive provided non-farm payrolls data do not beat expectations. We are sticking to our positive assessment in the medium and long term.”
THE LATEST SITUATION IN THE GOLD MARKET
Gold was trading at $1768 an ounce on the spot market in the afternoon hours.
As the dollar/TL rate traded at levels near 18, grams of gold traded at 1022 TL in the Grand Bazaar. Republic gold traded at TL 6,710 buys and TL 6,763,000 sells, quarter gold at TL 1,683 buys and TL 1,696 sells.
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