Gold prices have rebounded over the last three weeks but may see further selling at resistance.
Gold: Weekly Chart
The bounce in gold has gotten the market above $1,959, but at $1,970, weaker stocks on Friday could set up a bearish week for bullion.
Gold has been boosted in the last few weeks by a cooling of inflation in the United States. There were also signs of lower price pressures in the United Kingdom.
Investors are now looking at the potential for a pause in the Federal Reserve’s rate hike strategy.
The US central bankers will meet next week to decide on their next move, with analysts expecting two more rate hikes from the Fed this year. Economic data will be important now, with Retail Sales re-igniting the possibility that the US Federal Reserve may soon hit pause on the interest rate hiking cycle. Traders will be watching the weekly jobless claims data on Thursday. Employment growth was slowing modestly even as initial claims increased.
”Overall, the labour market remains fairly strong, and JOLTS job openings near 10 million suggest firms are still having difficulty finding workers,” analysts at Brown Brothers Harriman said. Jobless claims came in lower than expected at 228k, with analysts expecting a reading of 242k.
That is not likely enough to see a change in the Fed’s plans, as a rise in unemployment may have forced them to pause, but the jobs market remains robust.
Central banks have been big buyers of gold in the last year to hedge against inflation and geopolitical issues. They are also moving gold stocks home, with 68% of central banks now holding their gold reserves domestically, a significant increase from 50% in 2020. As political tensions increase, that figure is expected to jump to 74% in the next five years.
While gold derivatives and exchange-traded funds (ETFs) were traditional destinations, central banks are now preferring physical gold, which highlights a flight to safety.
