Danger! The Era of Glory is Difficult to Repeat, the Future of Gold is Gloomy

Jakarta, CNBC Indonesia – The price of gold is getting worse. During trading Thursday (18/5/2023) the price of gold on the spot market closed at US$ 1,958.06 per troy ounce. The price fell 1.19%. This price is the lowest since March 21, 2023 or almost the last two months.

Yesterday’s weakening also extended the precious metal’s suffering. Gold has slumped over the last three trading days with a weakening of 3.1%.

Gold prices slightly improved this morning.

In trading Friday (19/5/2023) at 05:48 WIB, the price of gold on the international spot market was at US$ 1,958.37 per troy ounce. The price slightly strengthened 0.02%.

The price of gold fell because market players saw the central bank of the United States (US) The Federal Reserve (The Fed) still going hawkish forward.

The US government debt ceiling crisis is also likely to be resolved. This situation has reduced economic uncertainty in the US, making safe assets such as gold less attractive.

Hopes of softening the Fed are fading after US jobless claims fell.

In the week ending May 13 there were 242,000 filings for unemployment claims. This number decreased compared to the previous week, which was 264,000 and was not in line with market expectations, namely 254,000.

With declining jobless claims, the US labor market is expected to remain hot and inflation will find it difficult to fall quickly.

On the other hand, US President Joe Biden and top Republican congressman Kevin McCarthy on Wednesday (17/5/2023) underlined their determination to reach an agreement quickly to raise the federal government’s debt ceiling by $31.4 trillion and avoid a catastrophic economic default. .

Previously, the President of the Richmond Fed, Thomas Barkin, said he was “comfortable” that the Fed should raise interest rates again in June to curb inflation.
The statement extends Cleveland Chief Loretta Mester’s statement saying the Fed is not yet at the point where they feel the need to hold interest rates on hold.

Likewise, the President of the Dallas Fed Lorie Logan also said inflation is currently not falling sharply enough to support the policy pivot.

Fed Governor Philip Jefferson said it was too soon to make a policy pivot based solely on current data.

The factors above clearly put pressure on the price of gold.
“The current situation is no longer positive in supporting the movement of gold as was the case in previous months,” said the analyst High Ridge Futures, David Meger, quoted from Reuters.

For the record, gold flew high and even touched a record on May 4, 2023.

Market participants are now betting 20% ​​if the Fed will raise interest rates in June. This condition is inversely proportional to last month where the market is betting 20% ​​The Fed will cut interest rates.

Changing the direction of market players makes yield US government bonds with a tenor of 10 years jumped to 3.64% or the highest since March 10.

This condition is unfavorable for gold because gold does not offer yield so investing in debt securities will be more attractive.

“Gold is likely to decline rather than rise going forward” said independent analyst Ross Norman.

CNBC INDONESIA RESEARCH

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