Jump to content

Gold Q1 2022 Fundamental and Technical Forecasts


MongiIG

Recommended Posts

Gold Q1 2022 Fundamental Forecast: Gold Fundamental Outlook Proves Mixed

Gold miners' Q3 2021 fundamentals - MINING.COM

It took US inflation rates surging to their highest level since March 1982 and the emergence of a new strain of COVID-19 for markets to shift in a more cautious tone significant enough to provide gold prices a lift in Q4’21. Gold’s gains, however, were nary predicated on news around China’s Evergrande or a potential US debt ceiling breach, both of which have seemingly fallen by the wayside from market participants’ radar.

While posting a modest positive performance in the final quarter of 2021, the shift by several central banks – Federal Reserve included – to begin withdrawing pandemic-era stimulus efforts had begun to weigh on longer-term inflation expectations, pushing up real yields at various points in time, undercutting gold’s appeal.

Entering Q1’22, the challenges thus remain the same. Should western economies weather the Omicron variant surge over the winter months without a protracted slowdown in economic activity, central banks will likely to continue their efforts to taper asset purchases and bump up interest rates from near zero.

RISING US REAL YIELDS PRESENT CHALLENGE

Here we are again, as we’ve been for the past several gold quarterly forecasts. The combined forces of elevated realized inflation in the short-term, met by central banks raising interest rates, and longer-term inflation expectations easing back, may prove to be too overwhelming to allow gold prices to sustain a significant rally.

Gold, like other precious metals, does not have a dividend, yield, or coupon, thus rising US real yields remain problematic. Put simply, when other assets are offering better risk-adjusted returns, or more importantly, offering tangible cash flows during a time when inflation pressures are raging, then assets that don’t yield significant returns often fall out of favor. This is true for gold prices just as it is true for high growth, zero revenue technology companies.

GOLD FUTURES VS. US TREASURY NOMINAL, REAL YIELDS AND US BREAKEVENS: DAILY TIMEFRAME

Gold Futures V US Treasury Nominal

Source: Bloomberg

The fact of the matter is that the bulk of stimulus provided by central banks and deficit spending implemented by fiscal authorities is now in the rearview mirror. These fundamental catalysts proved to be meaningful fuel for gold’s ascent in 2020, but even if Omicron rages, the political appetite for more stimulus in the face of persistently high inflation readings does not appear to exist.

Other factors may come into play, of course. China’s Evergrande and other property developers in the world’s second largest economy could default, provoking contagion that would ultimately weigh down global growth rates if Chinese economic growth falls towards some of the ‘secular stagnation’ rates long associated with western economies. But the US debt ceiling issue has been punted until after the 2022 midterms, leaving gold prices with few black swan-type events to look forward to that may supersede the real yields narrative.

CHANGE IN GOLD FUTURES (%) VERSUS CHANGE IN US 10-YEAR YIELD (REAL) (BPS):

Please add a description for the image.

Source: Bloomberg

Over the past five years, gains by US real yields have been generally correlated with losses by gold prices. A simple linear regression of the relationship between the weekly price change in gold prices and the weekly basis points change for the US 10-year real yield, reveals a correlation of -0.36. As a rule of thumb, rising real yields are bad for gold prices, ceteris Paribas.

GOLD MAY PROVE MORE RESILIENT THAN OTHER COMMODITIES

The Omicron variant may prove to be less of a health concern and more of an economic concern in the short-term, meaning growth-linked commodities could struggle through the winter months in the Northern hemisphere. Alas, gold is not a growth-linked commodity but rather a safe haven; and to that extent, while gold prices may experience rocky, sideways trading in Q1’22, they still may outshine industrial base metals and energy prices over the coming months.

By Christopher Vecchio, CFA Senior Strategist, 25th December 2021. DailyFX

Link to comment

Gold Q1 2022 Technical Forecast: Gold Technical Outlook – Struggling For Direction

Gold mid-tiers' Q3 2021 fundamentals - MINING.COM

 

By IIya Spivak, Head Strategist, APAC, 26th December 2021. DailyFX

Gold ended a two-year uptrend in August 2020. A modest pullback from there gave way to sideways drift in March 2021. Prices are now idling near the mid-point of the choppy range that has been carved out since. It is unclear whether the standstill will mark a base for renewed gains or a pause before the down move from the 2020 top is re-engaged.

SPOT GOLD (XAU/USD) – WEEKLY CHART

Gold Q1 2022 Technical Forecast: Gold Technical Outlook – Struggling For Direction

Chart created with TradingView

Zooming in to the daily chart, prices are attempting to grind upward through mid-range congestion near the $1800/oz figure. A sequence of higher highs and lows cautiously favors gains within the well-established $1677-1917 band. Immediate resistance is at 1808.16, followed by barriers in 1834 and 1871. Key supports are at 1750.78, 1818.89 and 1676.91.

SPOT GOLD (XAU/USD) – DAILY CHART

Gold Q1 2022 Technical Forecast: Gold Technical Outlook – Struggling For Direction

Chart created with TradingView

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      19,999
    • Total Posts
      87,974
    • Total Members
      69,148
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    Xandy
    Joined 26/09/22 09:20
  • Posts

    • Why is market closed for F&C Investment Trust
    • Gold, Brent crude and lumber head lower as recessionary fears lift the dollar Gold, Brent crude and lumber come under pressure, as growth concerns and a strengthening dollar hurt sentiment. Source: Bloomberg  Joshua Mahony | Senior Market Analyst, London | Publication date: Monday 26 September 2022  Gold falls into yet another multi-year low Gold been hit hard at the hands of the dominant dollar, with the strength of the greenback helping to eradicate any haven demand for this precious metal. With price having dropped back below the $1677 threshold, we are into levels not seen since the early days of Covid (April 2020). With price having consolidated over the course of the past week, the decline through $1654 brings about a new phase of this sell-off. This points towards expectations of further downside to come, with another consolidation/retracement phase likely to take shape soon enough. Both the intraday and long-term trend currently indicate a potential continuation of the ongoing bearish pattern, with bearish positions favoured unless we see otherwise. Thus, short positions remain prudent until we see the $1688 level breached. Source: ProRealTime Brent crude declines into eight-month low Brent crude has managed to breach the $87 support level dating back to early September, with price falling into the lowest level since January. The demand picture certainly remains under the microscope given expectations of widespread recessions, and a cost-of-living crisis that will likely curtail spending habits. There is still a good chance that we see some support if Iranian talks break down or the US reverses SPR releases and starts to build up supplies once again. This latest decline has taken price into the lower Bollinger Band, with a descending trendline also accompanying price around current levels. With that in mind, there is a chance we see price hold up before long, with a decline through this zone needed to signal a potential drive into 76.4% Fibonacci support at $81.25. To the upside, any near-term strength looks like a potential selling opportunity, with a bearish view holding unless price rises through the $95.19 swing-high. Source: ProRealTime Lumber finally breaks through $460 support Lumber has been under pressure over the course of the past week, with price finally breaking through the critical $460 support level. That has brought about a fresh two-year low for this commodity, as concerns around the housing market and economic growth bring questions over demand going forward. The fact that we have finally cleared out this critical support level means we are likely to see a bearish continuation here, with any near-term gains perceived to be a retracement of the sell-off from $578. Unless that price is breached, short-term strength is seen as a selling opportunity within a clear long-term downtrend. Source: ProRealTime
    • Early Morning Call: GBP/USD at lowest level since decimalisation in 1971 GBP in the mire dropping to a record low against the dollar, but down across the board. Europe expected to open mixed after the DAX and CAC hit a new low for the year on Friday. FTSE 100 is up while Asia is down overnight.    Jeremy Naylor | Writer, London | Publication date: Monday 26 September 2022  Risk-off prevails in APAC Risk-off sentiment prevailed in the Asia-Pacific region overnight, as investors reacted to Friday’s selloff in European and US equity markets and saw the dollar basket briefly rising above 114 in the early hours. UK mini-budget Sterling continues to lose ground against all major currencies as traders are still assessing the “mini-budget” unveiled by the Chancellor of the Exchequer, Kwasi Kwarteng. GBP/USD hit an all-time low of $1.0322 overnight, falling as much as 5% on Friday’s close. The FTSE 100 is starting the week higher paring some of Friday’s losses. The index dropped as much as 200 points after the presentation of the “mini-budget”, a hit three-month low. Among the biggest fallers in Friday's session were energy and materials producer, a direct consequence of a weaker pound. BP PLC, Shell PLC, Glencore PLC (LSE), Antofagasta PLC and Anglo American PLC all fell in excess of 5%. Macro overview In Japan, the Jibun Bank Manufacturing PMI fell to 51 in September, from 51.5 in August. This is the 20th straight month of expansion in the sector, but the lowest since January 2021. Services PMI rose to a three-month high of 51.9, from 49.5 in August, which meant that composite PMI climbed back to expansion territory at 50.9. Markets await Germany Ifo business climate at 9am. Economists expect the index to fall for a third straight month in September, to 87 from 88.5 in August. The same goes for the other two indicators, current conditions and expectations, expected at 96 and 79 respectively. This week will be a testing week for the DAX. German Gfk consumer confidence on Wednesday is expected to fall to a new record low in October. On Thursday, consumer price index (CPI) is forecast to jump to 9.5% in September, from 7.9% the previous month. And on Friday, retail sales in the country are anticipated to drop by 5.1% in August, twice the decline posted in July. A couple of indicators are expected in the US: the Chicago Fed national activity index for August and the Dallas Fed manufacturing index for the month of September. The dollar is very likely to stay strong. Overnight the dollar basket set a new two-decade high, rising as high as 114.41. Commodities On Friday afternoon, WTI fell below $80 per barrel for the first time since January. The highest point last week for WTI was on Wednesday morning, hours before the Federal Reserve (Fed) raised Fed funds rates by another 75-basis points. Since the announcement, oil dropped as the dollar strengthened. Last week was the fourth weekly decline for WTI and Brent, which was a first since November last year, and well on track for a fourth consecutive monthly decline, which hasn't happened since the first four months of 2020. Last Friday, Baker Hughes total rig count rose by one to 764. That's 243 up on this time last year. The number of oil rigs in operation increased by three to 602, while the operational gas rigs fell by two to 162. Dollar strength is also affecting base metals. Copper and zinc now trade at two-month lows. Aluminium ($5 Mini Contract) is at its lowest since March 2021. Lumber showed signs of weakness in the second part of last week, after Fed Chairman, Jerome Powell, highlighted the imbalances of the US housing market, and has now gone through an important support level, back to levels not seen since July 2020. Finally, a quick look at gold, which fell as low at $1,640 on Friday, its lowest level since April 2020.     This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.
×
×
  • Create New...