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05.07.202109:17 Forex Analysis & Reviews: Experts predicted how much gold will cost in the third quarter

Long-term review

Exchange Rates 05.07.2021 analysis

Towards the end of the working seven-day period, gold bars were supported by a decline in the yield of 10-year US bonds to 1.45%, as well as a weakening of the American currency, which had previously jumped to a 3-month high.

Also, bumpy statistics from the US labor market, published on Friday, became a fertile ground for the growth of the yellow asset.

According to the latest data, the number of new jobs outside agriculture rose to 850 thousand last month. The figure exceeded the predicted value of 706 thousand.

At the same time, the unemployment rate turned out to be higher than forecasted. Analysts had predicted it would fall to 5.6% from 5.8% in May. However, the indicator fell short of expectations and jumped to 5.9%.

Another powerful catalyst for the growth of gold these days is the tense epidemiological situation in the world. A new strain of the delta coronavirus is actively spreading in a number of Asian countries. This slows down their economic activity, but has a positive effect on the value of safe-haven assets, which traditionally include the main precious metal.

With such a fertile ground for growth, gold was able to return to its highs since June 23 on Friday. The asset went up in price by 0.4%, or $6.50. Its final price on the Comex New York Stock Exchange was $1,783.30.

The yellow metal gained 1.2% for three consecutive sessions. Its upward trend last week was the longest since May 26.

The most unfortunate month for a noble asset since the beginning of the year was June. In the first summer month, the yellow metal lost 7% in value.

Nevertheless, for the entire second quarter, the metal reported an increase. Thus, the price of spot gold has jumped 4% over the past 3 months.

Analysts believe that the springboard for gold in April and May (the most productive months since the beginning of the year) was the fall in the dollar index by 1% and the decline in the yield of US Treasuries by 27 basis points, to 1.47%.

Experts draw the attention of investors to the inverse interdependence of the precious metal with the exchange rate of the American currency and the yield of 10-year US bonds.

The yellow asset does not generate interest income. This means that as interest rates fall, the price of gold tends to move upward. And vice versa: the higher the yield, the lower the cost of the bullion.

An excellent illustrative example is the situation on the precious metals market last summer. The yield on American bonds fell to 0.5%, which was a historic minimum for the indicator. At the same time, the price of gold, on the contrary, jumped to a record high of $2,063 per ounce.

In the third quarter of this year, experts expect an increase in the yield of US government bonds. They believe that the indicator will be able to gain from 20 to 30 basis points and will be in the corridor between 1.65% and 1.75%.

Also, analysts predict the strengthening of the US dollar. In their opinion, the DXY US Dollar Currency Index could grow by 3% and approach 95. This will be facilitated by symptoms of an earlier rollback of the Fed's loose monetary policy.

In this situation, gold will not be able to stay in its current positions. Higher yields on US bonds and a stronger dollar will put significant pressure on the yellow asset.

According to experts, quotes may drop to $1,650 in the fall, and this is the most negative scenario. On the positive side, the maximum for gold in the third quarter will be $1,850.

Analysts are more optimistic about the short term. They believe that in the near future, the precious metal may receive significant support and continue the upward trend. However, its rapid growth is possible only on one condition, and that is if the asset is able to overcome the $1,800 mark.

Meanwhile, on Monday morning, gold remains positive over the past week. The asset has been growing for the fourth trading session in a row.

So, at the time of preparation of the material, the cost of the yellow precious metal approached the level of $1,786.95. The difference from Friday's close was $3.65, or 0.2%.

Exchange Rates 05.07.2021 analysis

Silver also rose in price. On Monday morning, it was trading at $26,600. Compared to the last session, the gray asset has grown by almost $0.1, or 2.01%.

Over the past week, the price of silver has jumped by 1.6%. This is the second seven-day period in a row, which the precious metal finished in positive territory.

lena Ivannitskaya,
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