On June 30th, a team led by Samantha Dart, co-head of Goldman Sachs' Global Commodities Research, stated in a recent report that the gold bull market is not over. The team noted that the precious metal's price has risen 123% since 2022, writing, "We continue to see room for further upside, driven by both structural and, ultimately, cyclical factors."
"From a structural perspective, the diversification of emerging market central bank reserves—following the freezing of Russia's foreign reserves in 2022—remains the cornerstone of our forecast for a gold price of $4,900 per ounce by year-end 2026," the report added. Since the outbreak of the Iran war in late February, precious metals have sold off sharply, with gold prices falling by approximately 24%. The sell-off subsequently accelerated amid strong inflation data influenced by high oil prices. Investors are now concerned that even with some pullback in crude prices, persistent inflation and a resilient labor market could prompt the Federal Reserve to keep interest rates higher for longer, or even raise them before the end of the year.
Additionally, on Monday, Kevin Hassett, Director of the White House National Economic Council, stated in a program that based on "all the signs we're seeing," Thursday's jobs report is expected to show "another strong number." He indicated that the surge in artificial intelligence productivity in the U.S. has a deflationary effect, so the case for raising interest rates currently is not strong. This week, financial markets will focus on upcoming U.S. labor data and inflation indicators, which investors will use to gauge the Fed's future interest rate path. Hassett emphasized during the interview, "The argument for hiking right now is not that strong." He stated that under current economic conditions, there is a lack of compelling reasons to support pushing interest rates higher. At the same time, he did not downplay the economy's strength, clearly pointing out that multiple indicators point to another robust jobs report, suggesting the U.S. labor market can maintain its strong momentum.
Key data to watch today includes Germany's June month-on-month real retail sales, the UK's final Q1 production-based GDP annual rate, Germany's June seasonally adjusted unemployment rate, Canada's May month-on-month seasonally adjusted GDP, the U.S. June Chicago PMI, the U.S. June Conference Board Consumer Confidence Index, and U.S. May JOLTs job openings.
Gold/US Dollar
Gold declined in a choppy session yesterday, narrowly holding above the 4000 level, with the current exchange rate trading around 3980. The resurgence of Middle East tensions stoking inflation concerns was the primary factor putting pressure on gold. Furthermore, lingering expectations for Federal Reserve rate hikes continued to weigh on the precious metal. However, a slight cooling of those Fed hike expectations limited gold's downside. Today, focus is on resistance near 4050, with support found around 3900.
Australian Dollar/US Dollar
The Australian dollar moved lower in a volatile session yesterday, posting a modest daily loss, with the current exchange rate trading around 0.6870. Besides persistent Fed rate hike expectations continuing to pressure the pair, the flare-up of Middle East tensions stoking market risk aversion also exerted some downward pressure. Nonetheless, a weaker U.S. dollar index, pressured by slightly diminished Fed hike expectations, limited the pair's decline. Today, focus is on resistance near 0.6950, with support around 0.6800.
U.S. Dollar/Canadian Dollar
The U.S. dollar/Canadian dollar pair moved higher in a choppy session yesterday, posting a small daily gain, with the current exchange rate trading around 1.4230. Besides short-covering providing some support, lingering expectations for Federal Reserve rate hikes also underpinned the pair. However, a rebound in crude oil prices, supported by renewed Middle East tensions, capped the pair's upside. Today, focus is on resistance near 1.4300, with support around 1.4150.
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