Gold suddenly went out of the way after starting 2022 positively. However, experts consider the current fall short-term, expecting the yellow metal to rise in the long term.
The current year has brought gold upwards, encouraging the markets. However, the precious metal began to decline, causing concern among investors. On Thursday, gold plummeted showing its largest one-day drop in six weeks. February Gold futures also declined by 2%, or to $ 1,789 per ounce. It is worth noting that they increased by 0.6% on Wednesday. The precious metal disappointed traders: gold's quotes fell below the psychologically important level of $ 1800 per ounce.
The yellow metal still cannot recover and is being massively sold amid growing yields on US Treasury bonds. Currently, the yield on US 10-year bonds exceeds the key indicator of 1.70%. Yesterday, it moved up to the highest values recorded in March 2021.
On Friday morning, gold rallied slightly, reaching a two-week low and updating the indicator of the previous session. The XAU/USD pair was trading at $1,791, which did not inspire much optimism among investors. However, analysts are counting on a successful long-term growth of the gold price, since it continues to lose in the short term. Experts believe that the precious metal will gather its strength and catch up in the near future.
According to experts, the Fed's "hawkish" position regarding the curtailment of incentives and the increase in rates is the reason why gold sharply collapsed. Earlier, the minutes of the December meeting of the US regulator was published, which surprised the markets. These reports showed the Fed's determination to raise rates earlier to slow inflation. The market completely sensed the central bank's tendency to rapidly increase interest rates and curtail incentives and immediately reacted by fleeing into the US dollar.
The Fed's hawkish stance has boosted the yield on 10-year Treasuries, analysts say. This contributes to the strengthening of the demand for the US currency, which is supported by investors' risk aversion amid expectations of an aggressive monetary policy tightening by the Fed.
Experts consider the current situation to be a win-win for the US dollar, but dangerous for gold. Analysts assess the current mood of the precious metals market as bearish, which is unfavorable for gold. The increase in the Fed's interest rates will switch investors' interest from the yellow metal to government bonds. According to experts, gold failed to break through the key resistance level near $ 1830, dropping to critical levels. Therefore, the current situation on the precious metals market is developing in favor of the bears. Experts emphasize that in order for the bulls to enter, the key level of $ 1830 should be broken down.
Gold's long-term prospect is more favorable than the short-term one. According to the Vice-Chairman of Blackstone Private Wealth Solutions Byron Wien, the price of the precious metal will rise by 20% this year, exceeding the level of $ 2,000, if it can return the status of a defensive asset. The expert also said that many investors will choose to invest in gold this 2022 to protect themselves from rising inflation. It should be noted that the global increase in inflation is in the hands of gold since market participants find a "safe haven" for their capital in it.
The currency strategist of Blackstone Private Wealth Solutions adheres to a "bullish" view of gold because he is sure that most investors consider it as part of their investment portfolio. Many market participants believe that this metal guarantees protection from macroeconomic and geopolitical risks. If the scenario proposed by B. Wien is implemented, gold will exceed $2,160 per 1 troy ounce, breaking previous records.
