JAKARTA - Gold prices are expected to still face pressure in next week's trade after recording a sharp decline throughout this week. A number of analysts assess that negative sentiment from the United States (US), especially related to the Federal Reserve's interest rate policy (The Fed), is still the main factor that weighs on the movement of precious metals.
Spot gold prices closed at around US$4,328 per troy ounce or weakened more than 4 percent in a week. Selling pressure is getting stronger after prices broke through the 200-day moving average, which has been an important support area for long-term trends.
The weakening of gold prices was triggered by stronger-than-expected US employment data. The nonfarm payrolls report showed an addition of 172,000 jobs in May, indicating that the US labor market is still solid even though interest rates are at high levels.
This condition strengthens the belief of market participants that the Fed does not have a strong reason to immediately cut interest rates. In fact, some investors have begun to take into account the possibility of a tight monetary policy if inflationary pressures increase again.
Managing Director of Bannockburn Global Forex Marc Chandler said that the current position of gold is still vulnerable after failing to maintain an important technical level.
"The price of gold looks quite heavy. After returning below that level, the US$4,367 area is an important technical level to pay attention to," he said.
Market attention next week will be focused on the release of US inflation data, namely the consumer price index (CPI) scheduled for Wednesday and the producer price index (PPI) on Thursday.
If inflation data shows a higher figure than expected, the Fed's chances of maintaining high interest rates for a longer period will increase. This condition has the potential to provide additional pressure on gold prices.
FxPro Senior Analyst Alex Kuptsikevich expects gold prices to still have the opportunity to weaken towards the US$4,250 per ounce troy area.
"The more often the long-term support area is tested, the greater the chance of penetration. The risk of decline still dominates in the short term," he said.
A similar view was expressed by President of Phoenix Futures and Options Kevin Grady. According to him, gold has the potential to retest the US$4,128 per ounce level, which was the lowest point in March if selling pressure continues.
However, not all analysts view the gold outlook negatively. President of Asset Strategies International Rich Checkan assessed that the current price correction could actually be an accumulation opportunity for long-term investors.
According to him, a number of fundamental factors that have supported the price of gold are still strong, including high global inflation, geopolitical uncertainty, and consistent gold purchases by central banks in various countries.
Founder and Executive Director of B2PRIME Group Eugenia Mykuliak also assessed that the current price weakness was more influenced by short-term investor profit-taking actions than by changes in the market fundamentals.
"As long as the central bank continues to buy gold and global risks remain high, the fundamentals of gold as a safe haven asset are still very strong," he said.
Thus, although the short-term outlook for gold is still overshadowed by pressure due to expectations of high interest rates in the US, some analysts assess that the long-term prospects for the precious metal are still supported by high global uncertainty and demand from central banks.
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