As we head into June, and approach the halfway point of the year, we’re taking a look at the current outlook for the gold price; what is driving current trends and what might the gold price do in the near-term.
Following strong gains in the first quarter of the year, gold has been relatively flat since mid-March when the banking crisis eased. Since that time gold has traded around the $1,950 - $2,000 per ounce range, and £1,575 - £1,600 in GBP. It has periodically tested new highs but has been hitting resistance at the key $2,000 per ounce level. A sustained breakout past this threshold will be the key sign for the next big rally in the precious metal, while falling below $1,900 would be considered bearish.
As was largely expected, the US House voted through a deal to suspend the US debt ceiling last night. The vote passed through fairly easily and is expected to make it through the next round of voting in the Senate. The deal will see the US debt ceiling suspended until 2025, removing any concerns of default until after the next presidential election. The current default date is expected to be June 5th however, so any last-minute hold-ups in the Senate could still pose a high risk of default.
For gold, and markets at large, this debt ceiling suspension was mostly priced-in, and has had little impact on the gold price. Instead, markets are turning once more to the Federal Reserve’s rate decision on June 14th. Markets are still swinging between expectations of further hikes, or a pause. Some Fed members have come out in favour of pausing for now, while others still see a case for further hikes.
There are signs that the global economy is slowing; Germany has entered an official recession, China’s factory output is falling and the Hang Seng Index has entered a bear market, and housing markets are cooling in both the US and UK. The extended period of high interest rates is having its intended effect, reducing consumer spending and demand, and bringing down inflation. All eyes are on the Fed however to see how far they will go, and whether they can achieve the desired soft landing.
The latest US job numbers are set to be released tomorrow, and the strength or weakness of those figures will likely guide markets further. The Fed will also have inflation figures on June 13th, just in time for their rate decision on the 14th. If jobs and inflation come in hot, expectations will shift towards a further rate hike, a stronger dollar, and lower gold. If inflation looks to be coming down then the Fed could pause, with the dollar weakening, and gold pushing higher.
It’s unclear then what direction gold will take, but movement is expected in the next two weeks, with the June 14th Fed meeting the likely spark.
