The price of gold fell in June. below $1,900, which is the lowest since mid-March 2023
The total drop in gold prices in US dollar terms since the peak that was set in the first week of May has already amounted to almost 9%. This marks an even bigger pullback in the gold price than the one seen in February this year.
It is worth noting that earlier the gold price had a big problem with breaking around USD 2050, which was attempted three times. First in holiday 2020, then in March 2022 and in May 2023. If the history of returns from this level were to repeat itself, the price of gold could move towards USD 1700 or even lower levels due to the fact that earlier, there may have been potential support in this area.
Gold does not seem to be attractive to investors because it does not pay interest unlike bonds or treasury bills. These, in turn, with the current policy of the FED, bear interest rates above 5% per annum and are also a safe investment after the suspension of the US debt limit was agreed. In addition, the latest data from the US seem to indicate that interest rates may remain high for longer, and the risk of materializing a negative scenario for the economy seems to be receding.
Data from the US do not support the price of gold
According to the figures published today, although they are for the first quarter, while the second quarter is already ending, it is worth noting that the gross domestic product (GDP) of the United States increased by 2%, in line with the third estimate of the Bureau of Economic Analysis. Previous estimates pointed to an annual growth of 1.3% in the first quarter. By contrast, the updated estimates primarily reflected upward adjustments for exports and consumer spending, which were partially offset by downward adjustments for fixed non-residential investment and federal government spending, the report said.
The Personal Consumption Expenditure (PCE) Price Index rose 4.1%, revised down 0.1 percentage point. The PCE price index excluding food and energy rose 4.9%, also down 0.1 percentage point from the previous estimate. The Gross Domestic Purchase Price Index increased by 3.8%, unchanged from the previous report.
It seems, therefore, that gold may lose its luster and without new news that is unpleasant for the world, such as an aggravation of the conflict, a powerful recession and the need to quickly cut rates along with the weakening of the USD, it may be difficult for the price to return to new highs.
Daniel Kostecki Financial Markets Analyst at CMC Markets Polska
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