Gold Climbs 2% Over the Week; Marks First Weekly Gain in Five

By Barani Krishnan

Gold prices experienced a 2% increase over the week, marking the first weekly gain for investors in five weeks. Although this uptick may have provided some relief from the downturn that began in mid-April, analysts warned that gold bulls remained vulnerable, especially with the dollar potentially approaching 20-year highs.

In contrast, the U.S. Dollar Index, which measures the dollar against six major currencies, recorded its first weekly decline in six weeks. As of Friday, the index stood at 103.23, close to the previous week’s high of 105.06, a peak not seen since 2000.

Another concern for gold investors is the movement of bond yields. The yield on the 10-year U.S. Treasury note decreased to 2.79%, down from May’s high of 3.2%. This shift in yields is due to lowered expectations regarding forthcoming interest rate hikes by the Federal Reserve, now anticipated to be half a percentage point for both June and July, rather than the previously speculated three-quarter point. Nevertheless, since rate expectations can change rapidly, there is a possibility that yields might rise again.

According to Craig Erlam, an analyst at OANDA, the latter half of the week favored gold as the market’s concerns shifted from aggressive monetary tightening to recession risks. This shift led investors to seek safe-haven assets, resulting in decreased yields and increased gold prices.

On the Comex market, gold prices settled at $1,842.10 per ounce, showing a modest increase of just 90 cents, or less than 0.1%, on that specific day. For the week, however, June gold rose by nearly $34, or 1.9%.

It was a volatile week for gold futures, which fell sharply on Monday to $1,785, reaching their lowest point since January’s bottom of $1,779.70.

Erlam pointed out the difficulty in predicting whether gold could maintain its recent recovery, as future Fed rate hikes seem largely priced in. He noted that the sustainability of gold’s price will depend on the genuine severity of economic concerns. While rate hikes typically reduce demand, a recession could have a similar effect. If the latter is perceived as a likely consequence of the former, gold’s prospects might improve.

Sunil Kumar Dixit, a chief technical strategist, echoed this sentiment. He stated that gold bulls should aim for the $1,867 and $1,892 levels, which would affirm the significant Fibonacci level of $1,917. However, he cautioned that a drop below the $1,836-$1,825 support range could undermine the current rebound, pushing prices down to the $1,800-$1,780 range. The market’s reaction to the $1,850 level will be crucial going forward.