Gold's failure to break past $ 1,800 puts another risk of massive sell-off. Daniel Pavilonis, a senior analyst from RJO Futures said that even though the metal quickly stabilized above $ 1,700 after the sudden crash two weeks earlier, there is not enough demand to sustain a continued rise in prices. Thus, gold will most likely plunge again to $ 1,670.
The main driver for this will be the upcoming symposium in Jackson Hole, during which the participants will discuss the topic: macroeconomic policy in an uneven economy. But the main focus will be the impending cutbacks in the ongoing support programs, which Fed Chairman Jerome Powell will address on Friday. Accordingly, such will lead to a sell-off in gold and problems for stocks.
But looking ahead, the Fed is unlikely to tighten monetary policy too quickly since the situation with COVID-19 is escalating due to the Delta variant. Moreover, the labor market is yet to achieve the target levels so the central bank will be willing to ignore higher inflation in order to see much-needed job growth, said Bart Melek of TD Securities.
And since the current situation makes it difficult for the US economy to recover to pre-crisis rates, not to mention the priority of the Fed is to achieve full employment, programs may not be withdrawn early, which is positive for gold.
Even so, Pavilonis said that until the yellow metal surpasses $ 1800, demand is unlikely to skyrocket.
Melek also said that gaining above $ 1,800 is a sign for improvements to come.
