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Gold could touch as low as $1,400 in the next 12 months

Gold could touch as low as $1,400 in the next 12 months
Jordan
Major
3 months ago
3 mins read

Gold is expected to trade within a range of $1,750/t oz. and $1,400/t oz. in the next 12 months, according to global macro models and analysts from Trading Economics.

As investors received contradictory signals from U.S. Federal Reserve officials on interest rate rises, gold prices traded at $1,780 per ounce in early trades Monday, not far from a 7-week low of $1,760 hit on June 17th. 

The fact that gold futures pricing has settled around $1,770 per ounce as a baseline level of support is noteworthy. The shrinkage of the 200- and 50-day moving averages is a caution to recent gold price action.

A technical chart pattern known as a “Death Cross” will emerge if this trend continues and the 200-day moving average falls below the 50-day.

Gold 50-day moving average: TradingView.com

Gold finds support at $1,760

Last week, gold prices closed on a high note, with increasing open interest and volume. In contrast, the yellow metal is still striving for the critical $1,800 per ounce barrier in the foreseeable future. On the negative side, the $1,760 area continues to be a hub of activity.

The asset is attempting to recover after a $100 drop last week, but it is struggling. Gold prices increased in response to the PCE report on Friday, but there is still insufficient impetus for purchasers to make a significant move higher.

Trading Economics analysts’ projection below depicts the possibility for gold to go into a downtrend for the next 12 months, based on the Federal Reserve’s activities.

Gold price forecast: TradingeEconomics.com

Meanwhile, the Commerce Department stated that its inflation index climbed 3.4 percent in May, based on U.S. statistics. According to the reading, the economy has grown at its highest rate since the early 1990s, but personal consumption has remained stagnant. For example, a ten-year U.S. Treasury bond yielded 1.53%.

Gold has been functioning as a hedge against the central bank’s inactivity when it comes to managing inflationary pressures, which is why it dropped so dramatically last week in response to the Fed’s first acknowledgment that they may need to act sooner rather than later.

The data provided on Friday reaffirmed that future inflation is possible, but the lack of an upside surprise helped gold regain some support.

The job market

New jobless claims decreased less than predicted in the previous week, indicating that the labor market’s rebound is slowing. Federal Reserve Chairman Jerome Powell pledged not to increase rates too rapidly in congressional testimony last week, stressing that the central bank will maintain its supportive economic position.

Analysts estimate that the country generated 675,000 new jobs in June. Numbers above this level is bad for gold due to the heightened risks of a hawkish Fed, while a reading below this level is considered a bullish sign for gold.

However, The World Bank is not so optimistic about the gold’s future. As previously reported by Finbold, The World Bank projects the price of gold to continue dropping in 2021 and 2022 as demand in key markets remains strained.

Whether we see consolidation on the metal this week depends on where investors place themselves on the inflation spectrum.

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Jordan Major
Author

Jordan is an investor and market analyst. He's passionate about stocks, ETFs, blockchain, and digital assets. At Finbold.com, he delves into the technicalities to obtain future trends for new market traders and gives insights into user-friendly platforms for beginners.