Market analyst Haresh Menghani states that gold has bottomed out on Monday and has stopped the recent correction pullback. New Covid-19 concerns are bolstering the precious metal, seen as a safe-haven amid persistent inflation fears, according to the analyst. Meanwhile, the analyst reminds that rising US bond yields and stronger USD gains on hawkish Fed expectations may limit the yellow metal’s gains. Cryptocoin. com we have compiled Haresh Menghani’s gold forecasts and analysis for our readers.
“Inflation concerns further strengthen the appeal of gold”
Gold reversed its decline in the Asian session to near two-week lows and is most recently hovering near the upper border of its daily trading range, just below the $1,850 level. According to the analyst, worsening Covid-19 cases in Europe were a key factor that benefited traditional safe-haven assets and helped gold pull a dip on the first day of the new week. While Austria says that it will be the first country in Western Europe to implement a full quarantine to combat the increasing infections, Germany states that it can do the same and makes the following assessment:
Apart from that, ongoing concerns about rising consumer prices further strengthen the attractiveness of the precious metal as a hedge against inflation.
However, the analyst states that hawkish Fed expectations and a stronger US dollar may limit further gains in gold prices. In fact, futures Fed funds transactions indicate the likelihood of a final Fed rate hike move by July 2022 and another hike by November. Meanwhile, speculation was further fueled by Fed Chairman Christopher Waller’s statement that the US central bank should increase the tapering pace to give it more room to raise interest rates.
Therefore, the expectations for the Fed’s early policy tightening continue to act as a headwind for the US Treasury bond yields. The analyst warns that this, along with the widespread bullish sentiment surrounding the US dollar, should prevent traders from making aggressive bull bets around dollar-denominated commodities. Haresh Menghani comments on these developments:
However, for now, gold seems to have stopped its corrective pullback from a multi-month high last week and broke its two-day losing streak. In the absence of any top economic statements from the US, dollar price dynamics and US bond yields will continue to play a significant role in influencing the non-yielding yellow metal.
The analyst says investors will take cues from developments surrounding the Covid-19 pandemic to seize some short-term opportunities in the precious metal.
Gold technical view: managed to find some support in the $1,834-32 region
Technically speaking, spot gold prices managed to find some support ahead of the strong horizontal resistance breakout of $1,834-32, market analyst Haresh Menghani says, which will now act as an important pivot point and help determine the next leg of a directional move. The analyst draws attention to the following technical levels:
A sustained break below triggers some technical selling and accelerates the decline towards the $1,800 area towards the $1,808-07 region. On the other hand, continued buying beyond the $1,850 level could trigger a short-term move and push gold towards the $1,865 resistance zone. The next relevant hurdle is fixed near the $1,875-77 area (multiple month highs) where gold could aim to reclaim $1,900 for the first time since June.