08.04.202113:19 Forex Analysis & Reviews: Gold declined after its recent growth

Long-term review

Exchange Rates 08.04.2021 analysis

Gold is going through some rough times, having lost some of its gains. However, experts note its inspiring prospects for the near future.

At the close of trading on Wednesday, April 7, gold futures sharply declined. Analysts of the precious metals market have recorded a decline in gold for the last four sessions. Nevertheless, some experts are sure that the quotes of the specified metal will recover amid the relatively positive prospects for the US economy and fluctuating dynamics of Treasury bonds.

The publication of the minutes of the Fed's March meeting, which was eagerly awaited by the markets yesterday, did not have a significant impact on gold. The precious metal prices slightly fell, and then rose again. On the morning of April 8, gold was trading in the range of $1741.83-$1742.23 per 1 ounce. June precious metal futures declined by 0.1%, that is, to $ 1,741. 60 per ounce.

Exchange Rates 08.04.2021 analysis

Despite the current decline, the start of this week has been positive for gold. Its price steadily rose, starting from the long-term weakening of the US dollar. But after the publication of the Fed minutes, the US dollar made a short-term growth amid possible economic growth in the United States. Following the meeting, the regulator maintained the volume of the asset purchase program at $120 billion per month, and the target range of federal funds rates remained at the same level of 0.0%-0.25%.

It should be noted that the precious metal fell to $ 1,678 per ounce last week in view of the dollar's short-term strengthening, and then returned to the current range. So, fundamental factors remain negative for gold. These include the strengthening of the USD, rising government bond yields and positive economic data in the US. At the moment, the decline in interest in gold is playing against it, but experts expect a further recovery of the yellow metal market after the end of the lockdowns caused by COVID-19.

Based on the calculations of HSBC Bank's analysts, the average annual cost of gold will be $ 1,830 per ounce this year, and then $ 1,800 per ounce the following year. Experts consider the outflow of investors from the "gold" and "silver" investment funds to be an alarming factor. However, Wells Fargo experts are optimistic and predict gold's price to rise to $ 2,200 per ounce in 2021. At the same time, the bank does not exclude a rally in gold in the second half of this year.

According to Wells Fargo analysts, now is the best time to buy the precious metal after its months-long correction. The rise in US inflation and Fed's continued low rate until early 2023 testify in favor of the gold purchases.

The yellow metal is strongly supported by its shortage in the global market. High gold prices are expected to be driven in the near future by a global reduction in its supply, as well as low rates and massive printing of money by central banks. Wells Fargo believes that this metal is at the start of a new supercycle in the commodities market. This is facilitated by the price growth of precious metals by more than 40% over the past three years. In conclusion, Wells Fargo experts expect gold to continue its upward trend this 2021.

Larisa Kolesnikova,
Analytical expert
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