Will gold rate decrease in the coming days?

During the first half of 2022, the gold price has been driven by the central banks raising interest rates in response to high inflation and resurfacing geopolitical risks. With the US dollar hitting a 20-year high, gold fell to a one-and-a-half-year low at the beginning of H2.

Will gold rate decrease in coming days given the current macroeconomic and geopolitical environment? Should you invest in gold now?

Gold market outlook for the coming days

In the near term, gold may remain reactive to real rates, driven by the speed at which global central banks tighten monetary policy to control inflation. Yet:

• rate hikes may create headwinds for gold, but many of these hawkish policy expectations are priced in
• concurrently, continued inflation and geopolitical risks can sustain demand for gold as a hedge
• underperformance of stocks and bonds in a potential stagflationary environment may also be positive for gold.

The gold price dipped below the $1,700 mark for the first time in a one-and-a-half-year on July 21, amid growing recession fears that caused losses across risk assets.

However, gold has managed to find a strong floor at the level of $1680 per ounce mark and garnered strong buying interest.

Gold continued to rally for 4 straight weeks on the mild hawkish stance of the US Fed on interest rate hikes and a fall in the US gross domestic product (GDP) data in the second successive quarter. The changes in stance have pulled down the dollar index from its 20-year high, as well as bond yields. So, once again investors have started looking at gold as a 'safe haven.'

Going ahead, the outlook remains negative for the coming days the gold price chart above shows. The current trend is bearish as indicated by a descending channel characterized by a series of lower highs and lower lows.

Source: CAPEX.com

Traders will go short during a descending channel, usually after completed short-term counter trends to key resistance levels.

However, once the channel is completed, traders will seek for long opportunities to profit from any increases in price. 

If Gold price breaks above $1.800, the asset’s price could be about to experience an overall upward trend for the next days and even years. If the resistance holds, the gold price could decrease in the coming days and by the end of 2022 could fall as far as $1,450/oz, the low in March 2020.

What will drive gold rates in the next days? 

According to the World Gold Council, the precious metal will face two key headwinds on the near term: 

• higher nominal interest rates 
• a potentially stronger dollar. 

However, the negative effect from these two drivers may be offset by other, more supportive factors, including: 

• high, persistent inflation with gold playing catch-up to other commodities 
• market volatility linked to shifts in monetary policy and geopolitics 
• the need for effective hedges that overcome potentially higher correlations between equities and bonds. 

In this context, gold’s both strategic and tactical role will likely remain relevant to investors, particularly while uncertainty stays elevated.

The Importance of a Gold price prediction for the coming days

Gold price forecasts should not be definitive since events in the future can change. However, you can use gold forecasts to allocate funds in your portfolio. For instance, if you believe that there is a bull market in gold, then you can add a little more to your gold holdings.

When considering any gold price forecast for the coming days, it’s important to keep in mind that high market volatility as well as macroeconomic and geopolitical environment makes it difficult to give long-term estimates. As such, analysts and algorithm-based forecasters can and do get their predictions wrong. 

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