The price of the XAUUSD is showing the Bearish momentum
The price of the XAUUSD is showing the Bearish momentum
Basic Synopsis
Ahead of several important US economic data points over the holiday-shortened week, the US dollar has regained its footing in the middle of the week. Asian traders ignored the weak Australian Consumer Price Index (CPI) report and the robust Chinese Industrial Profits data, following the bearish mood on Wall Street overnight.
In the last 30 minutes of trade, US indices lost ground as investors made adjustments to their holdings following a run that has already seen more than $4 trillion in value this year. Ahead of the conclusion of the quarter and the much-awaited meeting between US business leaders and Chinese President Xi Jinping, investors continue to exercise caution.
A new run down in the price of gold is fueled by the increased safe-haven flows into the US Dollar due to the decreased appetite for risky assets.
Nonetheless, the decline in the price of gold seems to have been mitigated, as the rates on US Treasury bonds are finding it difficult to stay higher due to persistent speculation about a Federal Reserve (Fed) interest rate drop in June. With a 70% chance that the Fed will cut rates in June, markets are not taking much notice of the Fed's recent hawkish remarks.
The continuation of geopolitical concerns and the dovish Fed outlook are driving the non-yielding gold price upward. On Monday morning, Russia launched hypersonic missiles toward Kyiv, the capital of Ukraine. Furthermore, after the Islamic State (IS) group claimed responsibility for the deadly Moscow concert hall attack, senior Russian officials directly accused the West and Ukraine of being complicit.
The address made later on Wednesday by Fed Governor Christoper Waller will be the next event of importance for the shining metal. Waller is scheduled to address monetary policy at the New York Economic Club. The key to a new direction in the price of gold will be found in his answers to queries from the media regarding the forecast for interest rates.
In addition, gold traders will be positioning themselves for the weekly statistics on personal spending and jobless claims as well as Thursday's final estimate of the US GDP. In the meantime, this week's major event risk is probably going to be revealed by the US PCE Price Index data, which is coming on Friday.
Following chart is based on one day.
Following a record-breaking jump on Wednesday, gold headed south and lost most of its weekly gains as positive US data releases countered the detrimental effects of the Federal Reserve's policy decisions on the value of the US dollar (USD).
The price of gold abruptly reversed course after reaching a record high.
With investors holding off on building big positions ahead of the Federal Reserve's (Fed) much-awaited March policy meeting, gold had a calm start to the week. On Monday and Tuesday, XAU/USD moved between $2,150 and $2,160, ending both days essentially unchanged.
As anticipated, the Fed maintained the policy rate at 5.25%–5.5% on Wednesday. The policy rate was expected to be lowered by 75 basis points in 2024, same as it was in December, according to the updated Summary of Projections (SEP), commonly referred to as the dot plot. Investors were leaning toward a rate decrease in June as a result of the initial reaction to the dot plot, which caused the yield on US Treasury bonds to decline and weighed on the US dollar. Prior to the Fed's pronouncements, there was a 40% chance that the policy rate would remain constant in June; that likelihood has since dropped to 25%.
Fed Chairman Jerome Powell pushed the USD to remain under bearish pressure by speaking in a comparatively upbeat manner about the inflation forecast during the press conference following the meeting. Powell claimed that seasonal effects were to blame for the "quite high" inflation figures in January and February, but he pointed out that they did not alter the overall picture of disinflation.
As the USD sell-off picked up steam during the Asian trading hours on Thursday, XAU/USD extended its rally and reached a fresh new all-time high above $2,220. Later in the day, however, upbeat macroeconomic data releases from the US helped the USD rebound decisively and forced Gold to retreat back below $2,200.
The number of first-time applications for unemployment benefits declined to 210,000 in the week ending March 16, the US Department of Labor reported. Additionally, S&P Global Composite PMI came in at 52.2 in March’s flash estimate, suggesting that the business activity in the private sector continued to expand at a healthy pace. Assessing the PMI surveys’ findings, “a steepening rise in costs, combined with strengthened pricing power amid the recent upturn in demand, meant inflationary pressures gathered pace again in March,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
Meanwhile, the Swiss National Bank’s (SNB) unexpected decision to lower the policy rate by 25 basis points and the Bank of England’s (BoE) policy announcements triggered capital outflows out of Pound Sterling and Swiss Franc, providing an additional boost to the USD on Thursday. Two members of the BoE’s Monetary Policy Committee (MPC), Jonathan Haskel and Catherine Mann, voted in favor of a hold after voting for a 25 bps hike in the previous meeting, while Swati Dhingra continued to vote for a 25 bps cut.
The broad-based USD strength forces XAU/USD to stay on the back foot ahead of the weekend but the pair managed to erase a portion of its daily losses as the 10-year US yield edged lower.
Gold price could have a delayed reaction to US PCE inflation data
The US economic docket will feature Durable Goods Orders data for February and the Conference Board’s Consumer Confidence Index for March on Tuesday. On Thursday, the US Bureau of Economic Analysis (BEA) will release the final revision to the fourth-quarter Gross Domestic Product (GDP) and publish the Personal Consumption Expenditures (PCE) Price Index data for February on Friday.
Markets expect the annualized fourth-quarter GDP growth to be confirmed at 3.2%. The market reaction to the GDP data could be straightforward and remain short-lived. An upward revision is likely to support the USD and weigh on XAU/USD, while a downward revision could weigh on the currency.
Although the PCE Price Index is usually watched closely by market participants, the trading action is likely to remain subdued on Friday with stock and bond markets remaining closed in observance of the Good Friday holiday. Hence, a delayed reaction could be witnessed at the weekly opening on Monday. A stronger-than-expected increase in the monthly Core PCE Price Index could support the USD at the beginning of next week. On the other hand, a print below the market consensus of 0.3% could help Gold gain traction.
Basic Synopsis
Ahead of several important US economic data points over the holiday-shortened week, the US dollar has regained its footing in the middle of the week. Asian traders ignored the weak Australian Consumer Price Index (CPI) report and the robust Chinese Industrial Profits data, following the bearish mood on Wall Street overnight.
In the last 30 minutes of trade, US indices lost ground as investors made adjustments to their holdings following a run that has already seen more than $4 trillion in value this year. Ahead of the conclusion of the quarter and the much-awaited meeting between US business leaders and Chinese President Xi Jinping, investors continue to exercise caution.
A new run down in the price of gold is fueled by the increased safe-haven flows into the US Dollar due to the decreased appetite for risky assets.
Nonetheless, the decline in the price of gold seems to have been mitigated, as the rates on US Treasury bonds are finding it difficult to stay higher due to persistent speculation about a Federal Reserve (Fed) interest rate drop in June. With a 70% chance that the Fed will cut rates in June, markets are not taking much notice of the Fed's recent hawkish remarks.
The continuation of geopolitical concerns and the dovish Fed outlook are driving the non-yielding gold price upward. On Monday morning, Russia launched hypersonic missiles toward Kyiv, the capital of Ukraine. Furthermore, after the Islamic State (IS) group claimed responsibility for the deadly Moscow concert hall attack, senior Russian officials directly accused the West and Ukraine of being complicit.
The address made later on Wednesday by Fed Governor Christoper Waller will be the next event of importance for the shining metal. Waller is scheduled to address monetary policy at the New York Economic Club. The key to a new direction in the price of gold will be found in his answers to queries from the media regarding the forecast for interest rates.
In addition, gold traders will be positioning themselves for the weekly statistics on personal spending and jobless claims as well as Thursday's final estimate of the US GDP. In the meantime, this week's major event risk is probably going to be revealed by the US PCE Price Index data, which is coming on Friday.
Following chart is based on one day.
Following a record-breaking jump on Wednesday, gold headed south and lost most of its weekly gains as positive US data releases countered the detrimental effects of the Federal Reserve's policy decisions on the value of the US dollar (USD).
The price of gold abruptly reversed course after reaching a record high.
With investors holding off on building big positions ahead of the Federal Reserve's (Fed) much-awaited March policy meeting, gold had a calm start to the week. On Monday and Tuesday, XAU/USD moved between $2,150 and $2,160, ending both days essentially unchanged.
As anticipated, the Fed maintained the policy rate at 5.25%–5.5% on Wednesday. The policy rate was expected to be lowered by 75 basis points in 2024, same as it was in December, according to the updated Summary of Projections (SEP), commonly referred to as the dot plot. Investors were leaning toward a rate decrease in June as a result of the initial reaction to the dot plot, which caused the yield on US Treasury bonds to decline and weighed on the US dollar. Prior to the Fed's pronouncements, there was a 40% chance that the policy rate would remain constant in June; that likelihood has since dropped to 25%.
Fed Chairman Jerome Powell pushed the USD to remain under bearish pressure by speaking in a comparatively upbeat manner about the inflation forecast during the press conference following the meeting. Powell claimed that seasonal effects were to blame for the "quite high" inflation figures in January and February, but he pointed out that they did not alter the overall picture of disinflation.
As the USD sell-off picked up steam during the Asian trading hours on Thursday, XAU/USD extended its rally and reached a fresh new all-time high above $2,220. Later in the day, however, upbeat macroeconomic data releases from the US helped the USD rebound decisively and forced Gold to retreat back below $2,200.
The number of first-time applications for unemployment benefits declined to 210,000 in the week ending March 16, the US Department of Labor reported. Additionally, S&P Global Composite PMI came in at 52.2 in March’s flash estimate, suggesting that the business activity in the private sector continued to expand at a healthy pace. Assessing the PMI surveys’ findings, “a steepening rise in costs, combined with strengthened pricing power amid the recent upturn in demand, meant inflationary pressures gathered pace again in March,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
Meanwhile, the Swiss National Bank’s (SNB) unexpected decision to lower the policy rate by 25 basis points and the Bank of England’s (BoE) policy announcements triggered capital outflows out of Pound Sterling and Swiss Franc, providing an additional boost to the USD on Thursday. Two members of the BoE’s Monetary Policy Committee (MPC), Jonathan Haskel and Catherine Mann, voted in favor of a hold after voting for a 25 bps hike in the previous meeting, while Swati Dhingra continued to vote for a 25 bps cut.
The broad-based USD strength forces XAU/USD to stay on the back foot ahead of the weekend but the pair managed to erase a portion of its daily losses as the 10-year US yield edged lower.
Gold price could have a delayed reaction to US PCE inflation data
The US economic docket will feature Durable Goods Orders data for February and the Conference Board’s Consumer Confidence Index for March on Tuesday. On Thursday, the US Bureau of Economic Analysis (BEA) will release the final revision to the fourth-quarter Gross Domestic Product (GDP) and publish the Personal Consumption Expenditures (PCE) Price Index data for February on Friday.
Markets expect the annualized fourth-quarter GDP growth to be confirmed at 3.2%. The market reaction to the GDP data could be straightforward and remain short-lived. An upward revision is likely to support the USD and weigh on XAU/USD, while a downward revision could weigh on the currency.
Although the PCE Price Index is usually watched closely by market participants, the trading action is likely to remain subdued on Friday with stock and bond markets remaining closed in observance of the Good Friday holiday. Hence, a delayed reaction could be witnessed at the weekly opening on Monday. A stronger-than-expected increase in the monthly Core PCE Price Index could support the USD at the beginning of next week. On the other hand, a print below the market consensus of 0.3% could help Gold gain traction.
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