Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Citi, Commerzbank stay bullish on gold medium-to-longer term

Published 06/08/2023, 05:43 PM
Updated 06/08/2023, 05:43 PM
© Reuters.

Investing.com -- The Federal Reserve’s potential rate hike pause next week could just be one reason to stay bullish on gold despite choppiness in the yellow metal now, analysts at Citigroup and Commerzbank said Thursday.

Gold is expected to average $1,965 an ounce in the near term, analysts at Citigroup said as they turned neutral on the yellow metal from its previous target of $1,915-$2,100. Even so, “fresh bullish legs” could emerge in the medium term, they said.

Commerzbank said its assumption was that the Fed will not want to raise rates further after its pause, to avoid over-tightening of credit conditions. “If our experts are right, the gold price should rise in the coming months,” said Commerzbank, which maintains forecasts of $2,000 and $2,050 for the third and fourth quarters, respectively.

The front-month gold contract on New York’s Comex settled at $1,978.60 an ounce on Thursday, up $20.20, or 1%, on the day. For the week, it was up 0.5%, the same as the previous week.

The spot price of gold, which reflects physical trades in bullion and is more closely followed than futures by some traders, was at $1,965.76 by 16:30 ET (20:30 GMT), up $25.75, or 1.3% on the day. For the week, spot gold was up nearly 1%, adding to the previous week’s near flat close.

Bets for a Fed rate pause have grown despite higher weekly unemployment claims among Americans.

According to Investing.com's Fed Rate Monitor Tool, there was a 73.7% chance that the central bank will stand down from a rate hike when its policy-makers sit on June 14.

To fight inflation, the Fed has raised interest rates by 500 basis points, or 5%, over the past 16 months, bringing them to a peak of 525 basis points, or 5.25%.

Ed Moya, analyst at online trading platform ONDA, said gold’s choppiness in recent weeks was due to a lack of conviction over the economy that hadn’t helped tip the market’s balance either way.

Gold traders now had their eyes on the next inflation reading due Tuesday from the U.S. Consumer Price Index report for May, Moya said.

The CPI hit 40-year highs in June 2022, expanding at an annual rate of 9.1%. Since then, it has slowed, growing at just 4.9% per annum in April, for its slowest expansion since October 2021. The Fed’s favorite price indicator, the Personal Consumption Expenditures, or PCE, Index, meanwhile, grew by 4.4% in April. Both the CPI and PCE are, however, still expanding at more than twice the Fed’s 2% per annum target for inflation.

Technically, gold could be poised for highs of $1,990 and beyond even if it heads back towards mid-$1,900 levels, said Sunil Kumar Dixit, chief strategist at SKCharting.com.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.