Gold prices rocketed higher, rebounding sharply from deep losses. They are now approaching the top of that brighter, medium-term consolidation range, which is between $3,250 and $3,400/oz. Fears of a U.S. stagflation are increasing. Consequently, investors are turning to precious metals, looking for shelter from a looming recession.
While services-sector purchasing managers’ surveys still indicate overall expansion, recent data indicate that the employment sub-index for these surveys has fallen sharply. This is the fifth month-over-month decrease in the past six months. This sharp decline is concerning not only for women’s economic advancement but signals fears about our economy’s long-term strength. Skyrocketing prices in everything from gas to groceries have drivers of stagflation raised alarm. This unique and difficult economic moment is characterized by stagnation with a dash of boom but a lot of inflation.
As sentiment in the markets perceptibly changes, expect the odds of a Federal Reserve cut in September to continue to rise. Many analysts believe that a cut in interest rates would make gold even more attractive as an investment. Traditional assets often lose their appeal in low-rate environments, however, gold shines even brighter. This feature makes it an attractive option for conservative investors looking to protect their wealth.
On top of this, demand for gold has skyrocketed in China, where consumer demand looks to be maniacal. As one of the world’s largest gold markets, this increased demand and its timing have moved the needle significantly on the recent price run up. Retail investors are often lured into trading through contracts for difference (CFDs) and spread betting. It is important to point out that 77.37% of retail investor accounts lose money when trading with this provider.
Analysts are taking a cautious stand noting that gold prices may have further to fall back to the $3,950 to $4,000 mark. This warning is in light of the recent increase in prices. The basis for this forecast is located at the 161.8% extension levels. Continue following the path suggested by the bullish breakout seen late last year to the heavy resistance zone mentioned around $3,420 at the end of April. The current concentration of these levels might suggest that gold is on the rebound. While these are admirable steps forward, initially leaving ART vulnerable to potentially severe market volatility.