(Kitco News) - Disappointing economic data, coupled with cooling inflation pressures, has pushed gold prices back above $3,200 an ounce. However, the precious metal is expected to continue experiencing heightened volatility as it maintains its long-term uptrend.
In his latest note on gold, Fawad Razaqzada, Market Analyst at City Index and FOREX.com, said he sees potential for gold prices to drop to $3,000 an ounce in the near term.
After a soft start to the week, gold prices are back above $3,200 an ounce. Spot gold last traded at $3,237 an ounce, up nearly 2% on the day.
He explained that the biggest risk for gold is improving investor sentiment as uncertainty surrounding global trade begins to ease.
“With no major bearish headlines dragging stocks down, the mood in markets has shifted decisively upbeat—and that’s bad news for gold,” he said. “Technically, gold looks vulnerable after making its first lower low and lower high.”
Looking ahead, Razaqzada said investors should watch the $3,100 level and then $3,000.
However, he added that this correction could present a buying opportunity.
“The long-term trend is still intact, but in the short run, the bearish pressure might have a bit more room to run despite today’s bounce from the trend line,” he said.
Razaqzada noted that one factor that could support gold is renewed selling pressure in U.S. long-dated bonds. The yield on 30-year notes has climbed back to 4.9%, its highest level since January.
“With both CPI and PPI undershooting forecasts, and with worries that Trump’s tariffs might unleash a fresh inflation wave now reduced—if not completely cooled off,” he said, “long-term yields are still not coming down much. This is something to keep an eye on, and it may also worry the Fed.”
Suki Cooper, Precious Metals Analyst at Standard Chartered Bank, continues to warn investors of potential downside pressure for gold, even as she maintains her bullish long-term outlook.
She noted that renewed strength in the U.S. dollar could weigh on gold.
“The USD has regained some lost ground, and the market has quickly unwound rate-cut expectations. The USD is trading at levels last seen just over a month ago, and the market is now pricing in 49.1 basis points of rate cuts by year-end—with less than 2 basis points expected in June (two 25-basis-point cuts this year)—compared to 75.9 basis points of cuts projected just a week ago,” she said. “The strengthening of the USD has contributed to the reduction in gold positioning. Market fears around inflation and a growth slowdown have eased, as have concerns over stagflation and recession.”
However, Cooper added that there are still plenty of risks in the global economy that could support higher gold prices.
“Barring near-term weakness, we expect gold to retain its upward momentum. Key factors to watch include ETP flows, official sector demand, and buying in China,” she said.
