As summer unfolds, investors in the gold market should brace for heightened volatility, according to Chantelle Schieven, Head of Research at Capitalight Research. She emphasized that the typically lower liquidity during summer months, coupled with ongoing market uncertainty surrounding the Federal Reserve’s decisions, could lead to erratic movements in gold prices.
“Gold is currently in a state of uncertainty, reacting sensitively to every economic data point as market expectations for Federal Reserve actions fluctuate,” Schieven explained. “The lack of clarity on the Fed‘s next move is driving volatility, with interest rate speculations causing frequent shifts in gold prices.”
Despite the current stagnation, Schieven pointed out that gold has established a resilient support level around $2,280 per ounce. Looking ahead, she anticipates the Federal Reserve to implement an interest rate cut in September to bolster the economy amidst persistent inflation pressures.
“The latest signals from the Federal Reserve indicate a shift towards labor market concerns over inflation worries,” she noted. “Given the weakness in underlying labor market indicators, I expect the Fed to move towards rate cuts post-summer.”
Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, echoed Schieven’s sentiments, anticipating continued support for gold in the short term as traders hedge their positions ahead of summer breaks. However, Aslam cautioned against expecting a breakout in gold prices in the near future.
“We believe gold will likely consolidate unless there are significant developments from FOMC members,” Aslam remarked.
David Morrison, Senior Market Analyst at Trade Nation, expressed a constructive outlook on gold despite recent challenges in sustaining prices above $2,350. He observed that recent market consolidations have stabilized the metal, with technical indicators suggesting a potential upward turn.
“The current fluctuations in gold indicate preparatory movements ahead of potential major shifts,” Morrison analyzed. “As summer progresses and trading volumes thin, these gyrations are expected to intensify.”
Conversely, Barbara Lambrecht, Commodity Analyst at Commerzbank, adopted a more cautious stance, citing the Federal Reserve’s reluctance to commit to an imminent easing cycle as a limiting factor for gold’s upward trajectory.
“With the first rate cut likely delayed until year-end, gold’s upside potential remains constrained,” Lambrecht cautioned. “Additionally, recent outflows from gold ETFs and high speculative investor optimism pose risks of price setbacks.”
Looking ahead, analysts will closely monitor upcoming economic data, including the Personal Consumption Expenditures (PCE) Index due next week, to gauge the Fed’s inflation stance. Weak inflation figures could reinforce expectations of a September rate cut, potentially supporting gold prices amidst ongoing market volatility.
