The future of gold prices

14 Mayıs 2024

The future of gold prices amid a mix of pessimism and inflation concerns

Today’s market analysis on behalf of Rania Gule Market Analyst at XS.com

Gold price (XAU/USD) corrected lower, dropping half a percent to $2340 today, Monday,
after U.S. consumer confidence data suggested that interest rates may remain higher for
longer amid rising inflation expectations, reducing gold’s appeal as a non-yielding asset. The
preliminary University of Michigan Consumer Confidence Index for May fell to 67.4 from
77.2, with economists expecting a milder decline to 76.0. Meanwhile, long-term inflation
expectations rose to 3.1% from the previous 3.0%.

In my opinion, elevated inflation expectations suggest that the Federal Reserve may
continue to delay its anticipated move to lower interest rates. This is negative for gold as
higher interest rates increase the opportunity cost of holding gold compared to interest-
bearing assets such as bonds or cash.

Consumer morale in the United States sharply declined in May to its lowest level in six
months amid stubbornly high inflation rates.

Military escalation in Rafah before a wide-scale invasion may elevate geopolitical tensions in
the Middle East, potentially boosting prices of precious metals like gold, a traditional haven
asset.
Stronger-than-expected economic data releases may weaken hopes for a Federal Reserve
interest rate cut, exert some selling pressure on gold, support the strength of the dollar, and
provide some insight into economic expectations and future inflation trajectory. Therefore,
this week is deemed highly significant for the markets.

Zaid Barem, Your Mind Media