Gold Risks a Pullback to $2,250 Amid a Cautious Fed

Gold hit an all-time high above $2450 in May. However, it has retraced more than 5% since then. A few key reasons were stronger-than-expected jobs data, and last night, the Feds reminded us all who’s in charge.

According to the dot plot, there will only be one rate cut this year, down from three previously and four next year. The Fed gave a little more hawkish guidance than expected. In the wake of the softer May CPI print, the dot plot projection helped dampen the rise in Gold prices.

• Gold hit $2450 in May but has dropped over 5% since.
• Reduced Chinese gold purchases and declining gold ETF holdings point to weaker gold prices ahead.
• Gold may range between $2250 and $2300 in the upcoming month.

Saqib Iqbal, a financial analyst at Trading.biz, thinks gold will come down slightly from their current levels.

He says, “I think gold prices will come down given the Fed maintains its cautious approach. Last night we saw J. Powell articulately not giving any hints on the rate cut. I see price ranging $2250-$2300 in the coming month. If we do get consistent softer CPI reports and the unemployment rate edging higher, it’ll allow the Feds to cut rates in September. Only then gold prices can rise beyond $2400.”

There’s another side to the Gold bearishness as well. Having bought gold reserves for 18 months, China halted buying gold in May after gold reached a record high.

China’s yearning for gold began to fade in April when the People’s Bank of China purchased just 60,000 troy ounces, as opposed to 390,000 ounces in February and 160,000 ounces in March. The record-breaking gold rise may temporarily dampen demand.

According to the World Gold Council, gold ETFs experienced inflows in May after 12 months of losses. Despite spot gold prices reaching record levels, gold ETF holdings have declined for much of 2024.

So, with all these factors coming into play, Saqib thinks there’s a strong case for weaker gold in the coming month.