Gold needs to cool down
April 26, 2023 10:23 amVideo
Latest News
- Analysis of GBP/USD on April 26th. The pound trades on Friday without changes April 26, 2024
- USD/JPY: Simple trading tips for novice traders on April 26th (US session) April 26, 2024
- GBP/USD: Simple trading tips for novice traders on April 26th (US session) April 26, 2024
- EUR/USD: Simple trading tips for novice traders on April 26th (US session) April 26, 2024
- GBP/USD: trading plan for the US session on April 26th (analysis of morning deals). The pound attempted, but it didn’t go April 26, 2024
- EUR/USD: trading plan for the US session on April 26th (analysis of morning deals). The euro continues to rise April 26, 2024
- Trading Signals for GOLD (XAU/USD) for April 26-29, 2024: buy above $2,324 and sell below $2,352 (21 SMA – 6/8 Murray) April 26, 2024
- Technical Analysis – AUDUSD set to complete best week of the year April 26, 2024
- Will Apple finally drop its AI hint? – Stock Markets April 26, 2024
- Bitcoin slips as markets pare back Fed rate cuts – Crypto News April 26, 2024
- EUR/USD. April 26th. Bulls continue to advance after the GDP report April 26, 2024
- Can Chinese PMIs solidify the economy’s recovery prospects? – Preview April 26, 2024
- Weekly Forex Outlook: 26/04/2024 – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too April 26, 2024
- XM’s Lombok Collaboration: Brightening Futures April 26, 2024
- Week Ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too April 26, 2024
- Market Comment – Yen keeps sinking after Bank of Japan decision April 26, 2024
- Fed faces dilemma amid sticky inflation and slowing economy – Preview April 26, 2024
- USD/JPY: trading tips for beginners for European session on April 26 April 26, 2024
- GBP/USD: trading tips for beginners for European session on April 26 April 26, 2024
- EUR/USD: trading tips for beginners for European session on April 26 April 26, 2024
Panic is the perfect environment for safe-haven assets. Gold has grown by 20% over the past six months due to the market’s regular turmoil. Concerns about a banking crisis and recession in the United States have pushed XAUUSD quotes up, even though a correction seemed inevitable. To survive in the market, it is necessary to learn how to separate the wheat from the chaff and not to take wishful thinking for reality.
The departure from the front pages of the banking crisis and a number of “hawkish” speeches from Fed officials talking about the need to continue the monetary tightening cycle, at least in May, allowed CME derivatives to increase the chances of the federal funds rate hike by 25 bps, to 5.25% at the next FOMC meeting to 91%. Interest rate swaps even show a probability of an increase not only in May but also in June. Monetary policy sensitive gold was forced to retreat.
However, the external background remains favorable for precious metals. According to most professional investors surveyed in the MLIV Pulse, the U.S. dollar will continue to weaken due to the Fed’s dovish turn, dedollarization, the strengthening of the yen and yuan, and a recession in the U.S. economy. According to two-thirds of central bank respondents in an HSBC survey, their peers will continue to increase gold purchases in 2023. The two main risks for regulators are inflation and geopolitics, both of which create a tailwind for XAUUSD.
Dynamics of gold purchases by central banks
The factor of increased activity of central banks cannot be underestimated. From the perspective of models based on real bond yields, gold appears overbought. Only the activity of regulators can explain its strength. There is a market opinion that any drop in quotes below $1950 per ounce will be immediately bought, so the correction potential for XAUUSD looks limited.
In my opinion, in the medium and long term, it is necessary to remain in the camp of gold bulls. Anything can happen in the short term. Strong statistics on durable goods orders, GDP, and inflation in the United States can revive interest in the dollar, raise Treasury bond yields, and increase the chances of a 25 bps federal funds rate hike in May. In such a scenario, gold will face serious difficulties, which are most likely temporary.
Ultimately, central bank purchases have not been canceled, and the most aggressive monetary tightening by the Federal Reserve will certainly cool the U.S. economy. If it freezes altogether, precious metals will once again become the darling of the public. We’ll wait and see, but for now, we must be prepared for increased market turbulence amid the release of important macro statistics from the United States.
Technically, a Splash and Shelf pattern has formed on the daily gold chart. The inability of the bulls to keep quotes above the fair value of $2003 per ounce and a fall below the lower limit of the shelf of $1975–$2011 are reasons for short–term sales.
The material has been provided by InstaForex Company – www.instaforex.com
Related Posts: