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The classic asset closed trading lower on Monday. On the New York stock exchange COMEX, an ounce of gold was valued at $1,732.7. The difference from the previous session was $12.10, or 0.7%. Due to this minus, the futures for the main precious metal fell to the level of a week ago, showing the lowest closing price since April 5.
On Tuesday morning, the downward trend is still maintained. At the time of preparation of this material, the June gold futures are trading at $1,727.15. Compared to the previous session, the price fell by $5.45, or 0.31%. Silver also continues to lose value. The May contract sank by 0.07% and was worth $24,852 as of 06.00 UTC.
The fall of precious metals is already the fourth session in a row, although before that they had been steadily rising for a week. Recall that the previous seven-day period was the most positive for assets since mid-January. During this period, gold prices rose by about 1.5%, while silver increased by 1.3%. News from the United States created a fertile ground for their growth – the weakening of the dollar and the decline in government bond yields. Commodity experts believe that the current reversal of assets in the opposite direction is also associated with the American factor.
The authority of gold was undermined by the strengthening of the dollar, but primarily by the growth of US treasury bond yields. Metal prices immediately reacted to the sell-off of securities caused by the recent optimistic statement of Fed Chairman Jerome Powell about the turning point in the US economy. David Russell of GoldCore notes that if this event affects gold only in the short term, then in the future the fate of the classic asset will be determined by growing optimism about the stabilization of the situation in the country and the increase in employment.
- Now that the Federal Reserve is more focused on employment than on inflation, will we be able to see the first signs of an acceleration in the rate of inflation? - says the expert.
Tomorrow, the world community will be able to get full information about the state of the American economy firsthand. The Fed will present its traditional economic review, the "Beige Book," which will largely help shed light on the current situation and, most likely, determine the near-term prospects for gold.
What will happen next?
Recently, many banks in their analytical notes presented disappointing forecasts for the yellow precious metal. Experts from the ICICI Bank estimated that since the beginning of the year, gold futures have fallen by almost 8%, although the price has remained stable in a fairly narrow range. In their opinion, in the second quarter, the trajectory of the classic asset will also be flat – in the corridor between $1,650 and $1,800, as investors will wait for the Fed's decision on raising interest rates. As for the second half of the year, which is expected to improve the prospects for global economic growth, gold may suffer significant losses during this period. ICICI Bank predicts a drop in demand for the safe-haven asset and a concomitant correction in its value to the level of $1,550-1,650.
Analysts from TD Securities also note that it is not worth hoping for gold growth in the near future. Currently, the yellow asset is in the recovery stage after the previous collapse, but there is no noticeable springboard that could push it up on the horizon yet. For this reason, investors should not expect significant price fluctuations. The quotes will be limited to a very narrow range, but still continue to move downwards. The main factors that will restrain the growth of gold are the stable strengthening of the dollar and the gradual recovery of the American economy against the background of improving the epidemiological situation in the country due to large-scale vaccination.
Citibank is in solidarity with its foreign colleagues and also does not see great prospects for gold this year. Recently, analysts lowered their initial forecast for the average annual value of the main precious metal by 4%: from $1,800 to $1,720. In their opinion, 2021 will pass without a new bullish cycle in the gold market. The asset has already set a record last year, which means that it will gradually decline in this and next years, experts say. Their forecast for gold for the second quarter is $1,675, and for the end of the year – $1,575. Next year, they also predict bad times for the classic asset. In 2022, the average price of the precious metal may fall to $1,570, although earlier Citibank voiced a more optimistic cost of an ounce – $1,700.
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