Gold traders await Fed’s interest rate decision

黄金 remained relatively unchanged since last week, as market fears of a recession have re-appeared, gold’s descent was put on hold and at the time of this report trades around the $1985 level. Following the lower-than-expected Preliminary US GDP rate for Q1, market fears of a recession were yet again heightened and at the time of this report, it appears that the shiny metal is moving in a sideways motion, as the markets await the Fed’s interest rate decision on Wednesday and the US Employment data on Friday. In this report, we aim to shed light on the catalysts driving the precious metal’s price, assess its future outlook and conclude with a 技術分析.

Mixed economic data keeps the precious muted

The mixed economic data stemming from the US has facilitated gold’s sideways movement, with the precious, remaining on hold near the $1985 level as these words are being written. Last Thursday, the US GDP rate for Q1 came in much lower than expected, with the actual rate coming in at 1.1%, in combination with the core PCE rates coming in higher than anticipate on a year-on-year basis for March, highlighted the continued deterioration in economic growth and the persisting high inflationary pressures in the US economy, respectively. In addition, the statements by Treasury Secretary Yellen may have provided temporary support for gold, as the “X-Date” for the US to default on its debt may be as soon as June 1 . The heightened fears of the US defaulting on its debt, facilitated inflows towards the precious given its store of value attribute and as such may find short term support until the matter is resolved. Furthermore, the renewed banking fears surrounding the collapse of First Republic re-ignited fears of a banking crisis in the US, which allowed gold to capitalize on a weaker greenback, given its safe haven status in times heightened financial instability. However, we note that the announcement by JPMorgan on Monday that it had purchased First Republic, seems to have temporarily alleviated pressure on the banking sector, thus capping the gains made by gold. In addition, the US ISM Manufacturing data for April, which was released on Monday, projected a stronger than anticipated manufacturing output by exceeding analysts’ expectations, thus renewing confidence into the US economy ,as the potential for a recession was downplayed. Overall, the financial releases from last week facilitated short term inflows into the precious metal, as market worries of a recession were heightened, yet contradicting financial releases have increased uncertainty in the market, as traders eagerly await the FOMC interest rate decision.

Gold traders itching for FED interest rate decision

The Fed is due to release their interest rate decision on Wednesday, with the Feds Funds Futures currently implying a 92% probability that the Fed will raise interest rates by 25 basis points. A validation of the 25-basis point expectations or an unexpected 50 basis point hike, could boost inflows towards the greenback 和 tarnish the precious due to their negative correlation. On the other hand, should the Fed surprise the markets and in the off chance that it choses to remain on hold, we may see gold soaring past its previous peak at $2050 and edge closer to its all-time highs, by capitalizing on a weaker greenback. Although gold traders may be more interested in the forward guidance released by the Fed, in which should a negative economic outlook be presented it could further fuel fears of a recession, whereas a should a positive economic outlook be broadcasted it could facilitate inflows to the greenback as investor confidence is regained, hence leading to outflows from the precious. Lastly looking past the Fed’s decision market participants will shift their attention towards the US Employment data on Friday, with heavy emphasis being placed on the US Non-Farm Payrolls figure for April which is predicted to decrease to levels last seen in February 2021. In the event that the predicted figures are materialized, we may see the greenback further weaking, leading to further inflows into the bullion whereas a better than predicted figure could strengthen the dollar and thus weaken the precious.

技术分析

黄金/美元4小时走势图

• Support: 1975 (S1), 1940 (S2), 1900 (S3)
• Resistance: 2005 (R1), 2040 (R2), 2075 (R3)

Gold’s price seems to continue in a sideways fashion since last week’s report, having broken below the upwards trendline on the 19    of April and has now formed a sideways channel. We tend to maintain a neutral outlook for the bullion, as long as the price action stays within the bounds of the channel, remaining confined between the 1975 (S1) and 2005 (R1) levels, with the RSI indicator staying near the reading of 50. For a bullish outlook to occur we would like to see a clear break above the 2005 (R1) resistance barrier and a move towards the 2040 (R2) resistance line. On the other hand, should the bears take over, we would require to see a clear break below support at the 1975 (S1) level with the next potential target for the bears being the 1940 (S2) support base. However, we note that the expected financial releases this week could heavily impact the gold bullion’s price in either direction, therefore caution is advised.

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