Gold price is facing difficulties, looking for buying opportunities

At a recent event hosted by the International Monetary Fund, Mr. Powell admitted that the Fed is not “confident” that monetary policy is restrictive enough to bring inflation down to the 2% target. The Federal Reserve is still ready to raise interest rates further if inflation continues to rise.

Lukman Otunuga, chief market analyst at FXTM, noted that gold prices are on track for their worst week in six weeks as Powell continues to maintain his dovish tone. December gold futures last traded at $1,939.90 an ounce, down nearly 3% from the previous week.

“Mr. Powell stated that the Fed remains cautious but is ready to raise interest rates if necessary. Currently, the market predicts only a 10% chance that the Fed will continue to raise interest rates in December. However, the timing of the interest rate cut is expected to be from July next year, instead of June as previously estimated. After failing to conquer the psychological level of 2,000 USD, gold prices tend to extend losses" - the expert said.

Bart Melek - commodities expert at TD Securities - assessed that the FED Chairman's speech continued to support the strength of the USD and also US Treasury bond yields - two significant obstacles to gold prices.

“Given the Federal Reserve's tightening bias, there is not a big incentive to buy gold at this time,” he worries.

Gold investors are once again turning their focus back to US monetary policy as Middle East tensions show no signs of easing.

Although gold prices may weaken next week, the situation is still positive compared to oil prices.

Some analysts note that lower oil prices could be beneficial for gold as they help ease inflation fears, making the Fed less dovish.

However, Melek said the market’s focus on US economic data (specifically the Consumer Price Index) next week means inflationary pressures will still take a long time to subside. The consensus estimate is that economists expect 12-month inflation to rise 3.3%, compared with an annual increase of 3.7% in September.

“The Fed has been clear that they need to control inflation, so if gold is to find any support next week, inflation needs to be closer to 3%,” Mr. Melek added.

Barbara Lambrecht, a commodities analyst at Commerzbank, said that although hotter-than-expected inflation could weigh on gold prices next week, buying opportunities will arise if inflation cools somewhat.

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