Gold price may fall back to $1,280 an ounce again

London (May 29)  Gold could fall back toward the $1,280-an-ounce area in the run-up to the next Federal Open Market Committee meeting, but then bounce once again, said TD Securities.

 The metal rose last week, ending a downward spiral that had been prompted by rising Treasury yields and a stronger U.S. dollar. Last week’s recovery was helped in large part by the latest FOMC minutes, which gave no indication that policymakers will accelerate the pace of interest-rate, hikes TDS added.

 In fact, yields fell back after Philadelphia Fed President Patrick Harker suggested that policymakers could no longer need to raise interest rates any further sometime in 2019, leading many gold traders to believe that real rates will be low, TDS noted.

“Still, more rate hikes are coming for now. As such, as we get closer to another FOMC and so long as U.S. data remains robust, precious metals could underwhelm,” TDS continued.

 The continued US dollar strength will likely drive the yellow metal back down test lows near $1,280 an ounce. But any data weakness would very likely see specs rebuild length, with short covering helping to propel prices higher north of $1,300 an ounce.

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