Gold shot up sharply last week, trading at a price above $ 1,800 an ounce ahead of the Fed monetary policy statement next week. The yellow metal grew 1.4%, and in COMEX hit a value around $ 1808.
Obviously, the upcoming speech of Fed Chairman Jerome Powell is something to watch out for.
Aside from that, several economic reports that will be released this week will also help markets assess the current situation. With it, investors will understand the state of the economy and how aggressively the Fed will move forward.
Among these reports are data on US inflation and retail sales, which will come out on Tuesday and Friday. And on Wednesday, there will be data on US PPI, followed by a report on jobless claims on Thursday.
Last week, the FOMC released their latest minutes of meeting, which hinted that the central bank is ready to take an aggressive approach regarding monetary policy. Bart Melek, head of commodity strategies at TD Securities, said the Fed obviously does not want to sacrifice price stability for full employment.
In line with this, OANDA Senior Market Analyst Edward Moya said this week will be in the hands of gold, as it is likely that the precious metal will rise in price, thanks to more active trading in the market.
The main driver is the recent decisions of central banks, which, at this point in time, already hints at some flexibility.
For example, China said it would cut the amount of cash that banks must hold as reserves by 50 basis points starting July 15.
Yields on US Treasuries have also begun to worry the markets, as 10-year yield fell below 1.3% this week.
Melek said this suggests that gold has a greater chance of hitting $ 1,900 over the next few months. However, there is also the possibility that the yellow metal will remain in its current range due to the many traders taking summer vacation, said Saxo Bank analyst Ole Hansen.
