Gold prices have begun the week with a rapid surge of momentum thanks to disappointing retail figures.
Prices reached a ten-week high of £1,518 ($1,983) during trading yesterday (Tuesday), sparking expectations of a new run towards the key pricing level of £1,546 ($2,000).
The burst of energy came as a result of a poorer than expected June U.S. retail sales report. While analysts had called for 0.5% month-on-month growth, the true figure was just 0.2%. The data, issued by the U.S. Commerce Department, has renewed hopes that the Federal Reserve will now end its rate hikes program following next week’s projected 25-base point increase.
StoneX market strategist James Stanley says this sentiment puts the bulls in complete control with a move to £1,546 ($2,000) likely today or tomorrow (Thursday).
Capital Economics’ chief North America economist Paul Ashworth says the disappointing retail data will set the tone for the rest of the summer – spelling great news for gold. He expects cooler figures to become the norm for the remainder of the year due to the impact of higher interest rates, the resumption of student loan repayments and more difficult credit conditions.
Should this happen, the Federal Reserve will have no option but to hit the stop button, therefore unleashing the gold bulls to begin their march towards record new highs.
“We think that there is a clear understanding among market players that next week the Fed will fire the last bullet from its gun— from there onwards, conversations will only be about the ongoing pause and a possible rate cut taking place,” explains Zaye Capital Market’s Naeem Aslam. “We believe all of that will be highly positive for the gold price.”
Gold expert Jim Wykoff concurs. He says that as it looks likely the U.S. will manage to achieve its targeted soft landing and avoid a recession, global demand for gold will shift into high gear. He said, “There is a sense now that the Federal Reserve may be nearer the end of its monetary policy tightening cycle because inflation appears to be under control and in a downward trajectory. It appears right now that we are going to come in for a soft landing for the U.S. economy in the coming months.”
He noted that there has been a solid rebound in gold prices, and as markets shift their focus to economic growth, demand for gold will increase.
Many projections place gold prices decidedly north of £1,546 ($2,000) by Q4. Yesterday’s price action could be a sign that we’ll see the current high smashed much sooner. Don’t delay. Buy gold now.
