Gold price remains vulnerable amid growth fears and rising oil

Gold remained below the $1,930 per ounce mark on Wednesday, as a robust dollar gained strength due to increased global economic uncertainties, prompting a surge in demand for the safe-haven U.S. currency.

The main factor impacting gold prices this week has been the combination of a strong U.S. dollar and rising U.S. Treasury bond yields. After a subdued start to the week with thin trading on Monday, the U.S. dollar saw renewed bullish momentum driven by risk aversion, which was fueled by renewed concerns about global economic growth.

Persistent worries about property markets and slowing growth in China amplified fears of a potential recession, especially amid the ongoing surge in oil prices. Oil prices reached their highest levels in 10 months following announcements from Russia and Saudi Arabia regarding the extension of voluntary oil supply cuts, with the latter saying it would extend its 1 million barrel per day production cut until the end of the year. The spike in energy prices raised concerns about inflation and the expectation that central banks might need to continue raising interest rates to curb inflation. This, in turn, posed a risk of the global economy slipping into recession.

Downward revisions in business activity data for the Eurozone and the UK, a slowdown in China's services sector growth, and disappointing factory orders data from the United States all contributed to the renewed global economic concerns. As a result, investors sought refuge in the U.S. Dollar, causing the gold price to decline to a six-day low of $1,924.

Despite these factors, the U.S. dollar largely ignored dovish comments made by U.S. Federal Reserve (Fed) Governor Christopher Waller. Waller stated on Tuesday that the recent positive economic data in the U.S. would allow the Fed some time to evaluate the need for further interest rate increases. He also noted that there was no immediate need to raise short-term borrowing costs.

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Gold price forecasts: Analysts see upside despite dollar strength

On Wednesday, research firm BMI said it maintains its 2023 gold price forecast at $1,950 per ounce (oz) despite current weakness.

FXStreet analyst Dwani Mehta pointed to $1,916 as the next relevant support level to watch for the gold price. As for the upside, Mehta wrote:

“The Gold price will need to recapture the 50 Daily Moving Average [DMA] support-turned-resistance at $1,932 on a daily closing basis to make another run toward the 100 DMA hurdle at $1,952.”

According to economic data aggregator TradingEconomics’ gold price forecast, based on global macro models and analysts' expectations, the previous metal was expected to trade 1962.48 USD/t oz. by the end of this quarter. The platform’s 12-month gold price forecast saw the commodity potentially rising to trade at 2033.46 in early September 2024.

When considering gold and other commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.