Gold price remains on the defensive at around $1,700, consolidating recent losses near 11-month lows. So, what levels are next? Here are the latest comments from ANZ Bank analysts…
ANZ expects a drop to $1,600 for gold
There is a break below the $1,760 trendline support. Gold prices recently hit an 11-month low. On the downside, the support level is located at $1,675. According to ANZ analysts’ report, XAUUSD could drop to $1,600 if this level is broken. Analysts point to the $1,675 support level while conveying that the market sentiment is also bearish. So, what happens if this level is broken too? Analysts use the following statements:
The market sentiment is bearish as the price moves towards $1,675. We expect it to hold this support level, otherwise it could drop to the $1,600 zone. A Fibonacci retracement from September 2018 low to this year high suggests the next support levels at $1,614 and $1,500.
According to analysts, there are currently no signs of a trend reversal. Immediate resistance is seen at $1,744. It is also argued that the downtrend will not break until it rises above $1,800.
What affects the price of gold?
So, what are the main factors of gold prices? Aggressive monetary tightening and a stronger US dollar will keep the precious metal under pressure. ANZ Bank economists reported that heightened recession fears and geopolitical risk in advanced markets could support demand for gold haven. ANZ economists also used the following statements:
US inflation reached a 41-year high of 9.1 percent in June. However, gold’s anti-inflationary status was not enough to offset central banks’ concerns about faster monetary tightening. If the Fed raises 75 basis points in the next two meetings, interest rates will rise to 2.25% by the end of July and to 3% by the end of September. Such a steep trajectory would be bearish for gold prices. This decline can be offset by the weakening economic outlook.
According to analysts, various indicators show the approaching recession. In addition, increased geopolitical risks and sales in the stock market can provide support. The US dollar is also likely to weaken towards the end of the year. This also provides some headwind for gold, according to ANZ analysts. In general, the US dollar continues to be effective. Besides the high returns that gold has not offered to investors, the breakout in the daily market structure and the expectations of a strong US dollar put pressure on the precious metal. The dollar tends to strengthen both when the US economy outperforms its peers and when the US economy looks weak.
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