Gold prices halted their nine-day losing streak on Friday, showing resilience despite recent challenges. While the precious metal remains down for the week, market analysts see potential opportunities on the horizon amidst ongoing economic uncertainty.
Throughout the week, gold faced considerable downward pressure, reaching its lowest levels since March. However, Friday’s session brought a glimmer of hope as gold prices climbed to $1,843.80 an ounce, marking a 0.66% gain for the day.
The positive momentum follows the release of a robust US Non-Farm Payrolls (NFP) report, which defied market expectations by adding 336,000 jobs last month, far surpassing the forecast of 170,000. Despite this strong job growth, analysts noted disappointing wage growth and an unchanged unemployment rate, suggesting that the Federal Reserve may have room to leave interest rates unchanged next month.
While gold’s recent performance has reflected concerns about rising US Treasury yields, some analysts see opportunities in the market’s current dynamics. Michael Moor, founder of Moor Analytics, suggests that gold is testing critical downside exhaustion levels, prompting investors to explore the precious metal’s potential.
Moor’s recommendation involves taking long positions in two future contracts, liquidating one when it becomes profitable while letting the other run. He identifies a significant exhaustion level at around $1,796, with the potential for a rally to signal the start of a new long-term bullish trend.
However, not all analysts share the same optimism, with many adopting a neutral stance on gold as they monitor bond yields. Rising long-term bond yields have been a significant driver of gold prices, and the precious metal’s recent decline coincided with 30-year bond yields reaching 5% for the first time since 2007.
While some experts believe bond yields may continue to rise, others suggest that the peak is approaching. Edward Moya, senior market analyst at OANDA, argues that the recent employment numbers represent the pinnacle of the US economy’s performance. He anticipates corporate struggles as bond yields affect various sectors, including consumer credit card debt.
The rise in long-term bonds, characterized by a bear steepening of the yield curve, has raised concerns of an impending recession for some analysts. However, others note that the bond market sell-off, although significant, has not reached crisis levels observed in the British bond market in previous years.
Looking ahead, next week’s inflation data could offer support for gold prices. Benign inflation readings may suggest that the Federal Reserve has completed its interest rate hikes, relieving pressure on bond yields. Despite the potential for gold to fall to $1,800 per ounce in the short term, rising market risks could make the current price an attractive entry point for investors.
In conclusion, gold’s recent challenges have not deterred market participants, with some seeing opportunities for the precious metal to rebound amid ongoing economic uncertainties.