The gold market remains trapped in the tug of war between the increase in interest rates and inflation; However, the momentum can shift to the bullish side because the price ends Sunday at the top of their range above $ 1,850 per ounce.

The price of gold has floated around $ 1,850 per ounce over the past three weeks. After some intense selling pressure on Friday morning, precious metals saw a dramatic rebound because the price bouncing from support right above $ 1,825 per ounce.

August Gold Futures searched to end the week with an increase of 1.5%, last traded at $ 1,876.50.

According to some market analysts, disappointing economic data, including inflation that is hotter than estimates, provides new bullish momentum for precious metals. At the same time, further weakness in the equity market is to increase the attraction of Haven which is safe gold.

Gold is doing exactly as it should,” said Bob Haberkorn, senior market analyst at Rjo Futures. “Investors once again view gold as a protected value of inflation and safe assets.”

Public market sentiment changed negatively on Friday after the US Department of Manpower said the consumer price index rose 8.6% for the year in May. Consumer prices have reached the highest level of 40 years, driven by an increase in food and energy prices.

A little later Friday morning, the University of Michigan said the consumer sentiment index fell to 50.2, the lowest level in 50 years. At the same time, consumers hope that inflation will increase by 5.4% in the next 12 months.

Haberkorn said that accents in equity and golden rally show that the market began to realize that there was no federal reserve to tame inflation.

Although the Central Bank U.S. will continue to raise interest rates, they will not be high enough to match inflation.

In this environment, what you really want is gold,” he said.

Ole Hansen, Head of Commodity Strategy in Saxo Bank, said that the increase in consumer prices increases the risk of policy errors, not only from the federal reserve but from central banks around the world.

Gold still needs to deal with Fed interest rates and increases

Although the momentum currently supports gold male ox, the market still faces several challenging headwinds because the federal reserve is expected to raise an interest rate by 50 basis points next week.

Hansen said he was neutral in gold next week because the market tried to find out how high interest rates would eventually leave.

At present, investors don’t know where the market will go,” he said. “I don’t want to be involved with gold until we see ongoing steps above $ 1,875.”

Bart Melek, Head of Commodity Strategy in TD Securities, said that the price of gold can go back down below $ 1,850 per ounce next week after the Monetary Policy Meeting of the U.S. Central Bank Monetary. He added that the short -term interest rate increase was still negative for gold.

However, Melek added that the question remained like a federal reserve commitment to tame inflation and whether they would risk encouraging the economy into the recession.

Long -term, Melek said that he remained bullish with gold because he hoped for the federal reserve “to peel the interest rate increase.

The Federal Reserve is not ready to do what is needed to control inflation,” he said.

Watch consumption data next week

While the market pays attention to inflation, analysts and economists also said that investors need to oversee consumption rates with the sales of retail. in the focus next week.

Hansen said that if inflation continues to affect consumers, weaker consumption will cause lower economic growth.

Economists note that the strong labor market and increasing savings have helped support consumers so far this year; However, savings have been reduced due to fading purchasing power.