With the tightening cycle coming to an end...what future awaits gold?

2023-06-07 16:02:00

The price of an ounce retreated from its highest peak near the $2080 level, after the market started pricing in the possibility of a more stringent monetary policy, and this news coincided with the beginning of issuing some that did not decline clearly with the rise in interest rates. If we look at inflation in general, the tightening cycle had a clear impact on it and it fell from 9.1% to below 5%. However, the consolidation in the US did not contribute to the fight against inflation, as the services sector remained relatively high and this negatively affected the core inflation data.

The equation is not simple, but clear. When we talk about tightening and raising interest rates further, we are witnessing a rise in bond yields, which in turn puts pressure on the price of an ounce of gold, since investors are leaving the safe havens to resort to investing in bonds, and this is what is called “capital rotation” or “head turnover.” the money”.

The markets are now awaiting the June meeting to find out the US Federal Reserve’s intentions with regard to raising interest and fighting inflation, or entering a new phase and keeping interest rates unchanged for the coming period.

Undoubtedly, the strong tightening is behind us and we are close to the ceiling of interest. Therefore, from a technical perspective, we closely await gold to finish the correction near the 1840/1880 level, and wait for a positive reversal sign to target new peaks near the 2270/2180 level for an ounce.