Gold (XAU/USD) Fundamental Forecast: Slightly Bearish
A return to the bullish Fed narrative drives USD, weighs on gold
US non-farm payroll miss throws the Fed another curveball - possible tailwind for gold?
Omicron Induced Volatility
After a rather volatile week gold is on track to finish the week within 1% of its opening level (at the time of writing). This, despite witnessing sizeable daily moves and trading well above $1800 reflects the underlying market sentiment of the last week. As a result, the gold volatility index reached an 8 month high
Fast forward to today and we are witnessing central bank rate hikes in New Zealand, South Africa, Russia and Poland with major central banks like the Bank of England considering a hike in December or early next year. 2022 and 2023 currently marks the timeframes in which major central banks are anticipating rate hikes which will once more elevate the attractiveness of interest bearing investments at the expense of gold. Therefore, it is clear that gold will face significant price pressure but the question of when this will happen still remains to be seen and with current volatility and uncertainty, a move higher is also not out of the picture.
For now spot Gold rests on a significant weekly level corresponding with the 23.6% Fib level (August 2020 high to August 2021 low) at around $1763 which could act as a springboard for higher prices if respected. The Fed could make mention of recent NFP miss as justification for remaining cautious but the more important unemployment figure of 4.2% is now well below the 4.5% identified in previous addresses. Therefore, this scenario may be less likely.
Alternatively, a test and break of the $1763 level remains possible if rates markets bet on an aggressive tapering timeline in an attempt to cool persistently rising inflation.
A return to the bullish Fed narrative drives USD, weighs on gold
US non-farm payroll miss throws the Fed another curveball - possible tailwind for gold?
Omicron Induced Volatility
After a rather volatile week gold is on track to finish the week within 1% of its opening level (at the time of writing). This, despite witnessing sizeable daily moves and trading well above $1800 reflects the underlying market sentiment of the last week. As a result, the gold volatility index reached an 8 month high
Fast forward to today and we are witnessing central bank rate hikes in New Zealand, South Africa, Russia and Poland with major central banks like the Bank of England considering a hike in December or early next year. 2022 and 2023 currently marks the timeframes in which major central banks are anticipating rate hikes which will once more elevate the attractiveness of interest bearing investments at the expense of gold. Therefore, it is clear that gold will face significant price pressure but the question of when this will happen still remains to be seen and with current volatility and uncertainty, a move higher is also not out of the picture.
For now spot Gold rests on a significant weekly level corresponding with the 23.6% Fib level (August 2020 high to August 2021 low) at around $1763 which could act as a springboard for higher prices if respected. The Fed could make mention of recent NFP miss as justification for remaining cautious but the more important unemployment figure of 4.2% is now well below the 4.5% identified in previous addresses. Therefore, this scenario may be less likely.
Alternatively, a test and break of the $1763 level remains possible if rates markets bet on an aggressive tapering timeline in an attempt to cool persistently rising inflation.
Trade closed: target reached:
At 1771