Gold prices increased slightly on Friday to over $2,000 an ounce after recent volatility, but analysts say continued recovery is unlikely.
Gold Sees Increased Volatility, Surges Above $2,000
In the last 52 weeks, gold has fluctuated between a high of $2,079 and a low of $1,991 per ounce. This highlights the relatively narrow trading range it has remained confined within over the past year despite some volatility.
While some see gold as a potential portfolio diversifier or hedge against risks, analysts note stocks have outperformed gold over the past five years, pointing to limited appreciation potential. Gold’s effectiveness as an inflation hedge has also been debated, with research suggesting it may only serve that role over extended periods. Its tendency for price swings makes gold a less stable asset in the short term.
According to analysts, despite recent upticks, pricing pressures remain, which could translate into continued turbulence for gold markets. Those betting on major breakouts beyond current ranges do so at the risk of further volatility.
Soft US Retail Sales Give Gold a Boost
Gold prices climbed above $2,000 an ounce Friday as unexpectedly soft Retail Sales figures underscored the precious metal’s sensitivity to new economic data releases. However, analysts cautioned that gold still faces near-term headwinds from declining hopes for Federal Reserve interest rate cuts, rising Treasury yields, and a strengthening US dollar.
Large outflows plagued Gold Exchange-Traded Funds (ETFs) over the past few weeks, draining over 76 tons of gold from fund inventories this year. The funds declined during 20 of the last 21 trading sessions, sparking worries over eroding investor confidence in gold’s near-term stability.
Markets are betting that the Federal Reserve will keep interest rates unchanged shortly. While that prospect fueled stock market optimism this week, it also put a cap on gold’s ability to climb higher. Fed policy outlooks and commodity prices often share a complex, inverse relationship.
Analysts said Friday’s gold surge was directly fueled by a slide in the US dollar following the gloomy retail figures. That demonstrated gold’s historical role as a hedge against currency devaluation.
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Disclaimer: Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
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