{"id":64033,"date":"2023-06-06T15:20:01","date_gmt":"2023-06-06T12:20:01","guid":{"rendered":"https:\/\/ironfx-com-php8.wp-dev.int.theitops.net\/?p=64033"},"modified":"2024-07-10T16:57:53","modified_gmt":"2024-07-10T13:57:53","slug":"the-downward-pressure-was-not-maintainable","status":"publish","type":"post","link":"https:\/\/www.ironfxcn.com\/fa\/the-downward-pressure-was-not-maintainable\/","title":{"rendered":"The downward pressure was not maintainable"},"content":{"rendered":"

\u0637\u0644\u0627<\/strong> continues its upwards<\/strong> trajectory<\/strong><\/a> reaching levels last seen before the debt ceiling deal. On a fundamental level, it seems that the inverse<\/strong> correlation<\/strong> between the dollar<\/strong> \u0648 gold<\/strong> is evident, as the weakening<\/strong> greenback<\/strong> has allowed gold<\/strong> to gain<\/strong>. In this report, we aim to shed light on the catalysts driving the precious metal\u2019s price, assess its future outlook and conclude with a technical analysis.<\/p>\n\n\n\n

US Employment data edges gold lower<\/strong><\/h2>\n\n\n\n

Last Friday, the release of the US Employment data<\/strong> for May sent gold\u2019s<\/strong> price to lower<\/strong> ground<\/strong>, as the mixed<\/strong> employment report<\/strong> surprisingly<\/strong> provided support<\/strong> for the greenback<\/strong>. The Employment<\/strong> report noted that the Unemployment rate increased<\/strong> faster<\/strong> than anticipated<\/strong>, from 3.4% to 3.7% whereas the Non-Farm Payrolls<\/strong> figure came in at 339k<\/strong>, compared to the expected figure of 180k<\/strong>. Thus, vastly exceeding<\/strong> analysts\u2019 expectations<\/strong> of a loosening US labor<\/strong> market<\/strong> and in the aftermath of the Employment<\/strong> report<\/strong>, it appears that the NFP<\/strong> figure<\/strong> outweighed<\/strong> the increase in the Unemployment<\/strong> rate<\/strong> and as such provided support<\/strong> for the greenback<\/strong>. However, the greenback\u2019s rise<\/strong> was only temporary<\/strong>, as yesterday the ISM Non-Manufacturing PMI figures for May, came in lower<\/strong> than expected<\/strong> which was indicative of the Services<\/strong> industry<\/strong> expanding<\/strong> but at a slower<\/strong> rate<\/strong>. The ISM Non-Manufacturing PMI figures, re-ignited<\/strong> fears that the US<\/strong> economy<\/strong> is not as resilient<\/strong> as was previously anticipated and as such spiked<\/strong> fears of a potential<\/strong> US recession<\/strong> in the near future. Therefore, gold<\/strong> may have received safe haven inflows<\/strong> given its status as a hedge against times of economic uncertainty.<\/p>\n\n\n\n

FOMC blackout period in full swing<\/strong><\/h2>\n\n\n\n

We are currently in the FOMC\u2019s<\/strong> blackout<\/strong> period<\/strong>, with the monetary policy meeting set to take place on the 14 <\/sup> of June<\/strong>, we highlight the difficult<\/strong> decision<\/strong> faced by Fed<\/strong> policymakers. One of the last Fed<\/strong> policymakers that spoke before<\/strong> the blackout<\/strong> period<\/strong> was Philadelphia Fed President Harker<\/strong>, who\u2019s comments about potentially skipping<\/strong> the FOMC\u2019s<\/strong> next meeting, was perceived<\/strong> as dovish<\/strong> with the inclination<\/strong> that the Fed<\/strong> may pause<\/strong> its aggressive<\/strong> interest rate<\/strong> policy<\/strong>. The comments<\/strong> made by Philadelphia Fed President Harker<\/strong>, may have been a key<\/strong> factor<\/strong> behind the dollars<\/strong> weakening<\/strong>, as it could hint that the Fed is nearing<\/strong> its terminal<\/strong> rate<\/strong> at a faster<\/strong> pace<\/strong> than previously anticipated<\/strong> .In addition, despite the employment<\/strong> data, it is our own personal view<\/strong> that the Unemployment<\/strong> rate<\/strong> may be the predominant<\/strong> factor<\/strong> in the Fed\u2019s interest rate decision<\/strong> which is due next week on the 14 <\/sup> of June. Market analysts<\/strong> expect the Fed<\/strong> to pause<\/strong> in its next meeting, with our own personal<\/strong> view<\/strong> being that, should the Fed pause, the forward<\/strong> guidance<\/strong> may lean slightly to the hawkish<\/strong> side, suggesting<\/strong> future rate hikes<\/strong> in the future<\/strong>. Whereas should the Fed hike<\/strong>, our view<\/strong> is that the forward<\/strong> guidance may lean<\/strong> towards<\/strong> the dovish<\/strong> side by hinting<\/strong> an earlier than expected rate<\/strong> cut<\/strong> or at the very least a pause<\/strong>. In conclusion<\/strong>, as the Fed\u2019s interest<\/strong> rate decision<\/strong> nears, we may the precious<\/strong> capitalizing<\/strong> on a weaker<\/strong> dollar<\/strong>, as the market sentiment<\/strong> currently appears to be leaning<\/strong> towards an interest<\/strong> rate<\/strong> pause<\/strong>, rather than a rate<\/strong> hike<\/strong>.<\/p>\n\n\n\n

Debt ceiling deal calms market worries<\/strong><\/h2>\n\n\n\n

The drama<\/strong> surrounding the US defaulting<\/strong> on its debt<\/strong> has evaporated<\/strong>, following, last week\u2019s decision by the House of Representative<\/strong>s and the Senate<\/strong> to vote in favour of raising the debt<\/strong> ceiling<\/strong>. As a result, market worries<\/strong> of a catastrophic scenario have now dissipated<\/strong>, with the greenback<\/strong> temporarily receiving inflows<\/strong>, as investors regained confidence<\/strong> in the US<\/strong> economy<\/strong>. The raising of the debt ceiling resulted in a stronger<\/strong> greenback<\/strong> and given the precious\u2019<\/strong> perception<\/strong> of being a hedge<\/strong> in times of economic<\/strong> uncertainty<\/strong>, the aversion of a US default led to the gold<\/strong> bullion<\/strong> weakening<\/strong>.<\/p>\n\n\n\n

Technical Analysis – Gold<\/strong><\/h2>\n\n\n\n

XAUUSD H4 Chart<\/em><\/strong><\/h3>\n\n\n\n
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