Gold price expectations and a possible decline before rise

Gold prices in European markets on Monday witnessed a decline for the first time in the previous four days, giving up its highest level in six weeks. This decline is due to the continued correction and profit-taking operations, in addition to the pressure of the US dollar, which witnessed a recovery at the beginning of this week. During this week, the markets expect several events of importance to investors, including the testimony of the Chairman of the US Federal Reserve, Jerome Powell, before Congress. . Other Fed policy makers’ statements will also be followed, in addition to key US inflation data. Investors aim to find strong evidence about the future of US interest rates this year.

Also affecting gold bullion prices is the decision of the People’s Bank of China (the Chinese central bank) not to purchase gold for its reserves in June, and this is the second month in a row in which the bank has refrained from purchasing gold. The opening level of trading was $2,391.71, and reached the highest level at $2,391.71. At the end of last Friday’s trading, gold prices witnessed an increase of about 1.5%, recording the highest level in six weeks at $2,392.98 per ounce, after the release of weak data on the labor market in the United States.

Last week, the precious metal “gold” recorded an increase of 2.8%, which is the second weekly rise in a row, thanks to the decline in the value of the dollar and US government bond yields, in light of rising expectations of US interest rate cuts at least twice during this year. According to official data published in Beijing, it showed that the world’s largest gold consumer, China, refrained from buying gold bullion in June, and this is the second month in a row.

What are the main factors affecting changes in gold holdings in this fund?

For The People’s Bank of China (China’s central bank) stopped buying gold in May after continuing to buy it for 18 consecutive months. This data raised concerns about possible selling by the Chinese central bank. There are positive expectations about gold’s performance based on the opinions of some analysts in the financial market. A financial markets analyst indicates that the significant rise in the price of gold on Friday after the release of US jobs data may lead to limited profits in the current period. The chief analyst indicates that the weak US inflation report and cautious statements from Jerome Powell, Chairman of the US Federal Reserve, may constitute an ideal catalyst for gold and push it to consider new high levels.

Simpson believes that China’s temporary halt to buying gold may be due to specific reasons, but demand for gold still exists in general. It is expected that gold will continue to rise and attract interest in bullish bets in the event of any declines. The report may indicate that gold holdings at the SPDR Gold Trust, one of the largest globally supported index funds, remained little changed on Friday, for the second day in a row. The total volume of gold held in the fund is about 834.81 metric tons

There are factors that affect changes in gold holdings in the SPDR Gold Trust and other index funds:

Investment demand in gold: Public demand for investment in gold is a major factor. When interest in gold as a safe haven or as a protection against inflation or economic turmoil increases, investment in gold-backed index funds increases, and thus their holdings rise.

Market Expectations and Inflation: The impact of prevailing market expectations and inflation on gold’s performance also has an impact on the Fund’s holdings

Gold Market Analysis: Price Predictions and Influencing Factors

Expected scenario:

The gold price shows an additional bearish tendency, affected by the negativity of the Stochastic indicator, and may head to test the pivotal support floor of $2340.10 before returning to the rise again. Until now, the bullish trend scenario is still valid for today, provided it remains above the mentioned support level, remembering that our main expected target reaches $2400.00.

Expected trading range:

between support $2365.00 and resistance $2405.00. Markets expect a 78% chance of a September interest rate hike by the Federal Reserve, according to the US interest rate tracking tool available on the Investing Saudi website. Traders are also factoring in the increasing possibility of a second interest rate cut in December. Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

The market’s focus this week is on Federal Reserve Chair Jerome Powell’s semi-annual testimony before Congress, comments from Fed officials, and US inflation data. The senior analyst said that the weak US inflation report and Powell’s anticipated comments appear to be ideal catalysts for gold.

Changes in the price of gold. The size of the fund’s holdings is affected by changes in the price of gold. When the price of gold rises, the value of the Fund’s holdings increases, and investors may tend to increase their investments in the Fund. The opposite is true when the price of gold falls. Global market developments: The Fund’s holdings may be affected by global market developments in general, such as geopolitical tensions, armed conflicts, economic deterioration, or changes in the monetary policies of central banks.

The flow of capital into or out of gold-backed index funds is an influential factor. When more capital flows into the fund, the size of its holdings increases, and vice versa when capital flows out of the fund.

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