Jump to content

Gold Price Forecast: XAU Shines Amid Volatility Despite Surging Yields – CPI in Focus


Recommended Posts

GOLD, XAU/USD, VOLATILITY, INFLATION, CPI, TECHNICAL FORECAST- TALKING POINTS

  • Gold prices underpinned by equity market volatility and rising inflation
  • United States CPI figures in focus as 50 bps Fed rate hike bets firm up
  • XAU/USD may see a short-lived breakout if prices clear an area of resistance
 

Gold prices are on the rise for a second week despite rising bond rates in the United States and Europe, spurred by increasingly hawkish monetary policy bets between the Federal Reserve and the European Central Bank. The chance for a 50 basis point rate hike liftoff at the March FOMC meeting stands at 24%, up from 8.5% on January 30, according to the CME FedWatch Tool. The ECB is looking at nearly 50 basis points of hiking by December, according to overnight index swaps (OIS).

The prospect of higher rates is a headwind for bullion prices, given that gold is a non-interest-bearing asset, but high inflation and recent volatility across equity markets, particularly in the US, has underpinned the bullish narrative for the yellow metal. That is because gold is a favored asset to hedge against volatility and inflation.

Inflation expectations have eased recently, reflected by falling breakeven rates, although this week’s US CPI report may revive the overall outlook over rising prices. Analysts expect to see a 7.3% y/y rise for January’s data due out later this week, according to a Bloomberg survey. That would be the highest rate of inflation seen since 1982. A better-than-expected print would likely further fuel Fed rate hike bets. While on face value that would be bad for gold, it could be worse for the equity market, which is highly sensitive to rate changes as they eat into the present value of future cash flows.

That said, if this week’s CPI print does firm up those bets and the equity market also reacts negatively, it may benefit bullion prices, as investors would likely shift to haven assets. The benchmark 10-year Treasury note’s yield has risen sharply over the last several weeks, and it is near the high-profile 2% mark, a level not traded at since July 2019. Gold’s ascent amid those higher yields supports the view that it remains attractive as a hedge against volatility. It’s also worth keeping an eye on tensions on the Ukrainian border, as an escalation may bolster prices further, given that a geopolitical event could spark more selling across risk-sensitive assets.

GOLD TECHNICAL FORECAST

Gold is approaching a key level that has previously offered strong resistance. However, prices fell back through that level before the current rebound. The last breach put in a higher low from the November high and revealed a descending trendline that has acted as resistance. That said, a break higher may be short-lived. Alternatively, if prices fall, the 1800 psychological level and 200-day Simple Moving Average (SMA) may defend against further losses.

GOLD DAILY CHART

gold, gld, xau, chart

Chart created with TradingView

 

--- Written by Thomas Westwater, Analyst for DailyFX.com. 8th Feb 2022

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
      20,020
    • Total Posts
      88,025
    • Total Members
      69,015
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    Zeltuan
    Joined 28/09/22 08:19
  • Posts

    • Broadcom Inc., Elliott Wave Technical Analysis Broadcom Inc., (AVGO:NASDAQ): Daily Chart, September 28 2022,  AVGO Stock Market Analysis: I wanted to zoom out to show you how we are approaching thevolume point of control off the entire rally from the Covid-19 lows. AVGO Elliott Wave count: Z of (2). AVGO Trading Strategy: Looking for a clear sign of upside resumption to then place long termtrades. AVGO Technical Indicators:We have been in oversold territory for a while now that is couldbecome interesting to buy in the future. TradingLounge Analyst: Alessio Barretta Source Tradinglounge.com Get trial here!       Broadcom Inc., AVGO: 4-hour Chart, September 28 2022 Broadcom Inc., Elliott Wave Technical Analysis AVGO Stock Market Analysis: I would be looking for further downside as the move down inwave {c} does not seem complete. In addition to that we are lookin at equality of W and Z at 424$. AVGO Elliott Wave count: {c} of Z. AVGO Technical Indicators:Below all averages in oversold territory.  AVGO Trading Strategy: Looking for short term shorts, eventually using the 20EMA asresistance as long as every upside pullback is in a three wave nature.
    • FTSE 100, DAX and S&P 500 hold their ground in early trading FTSE 100, DAX and S&P 500 hold their ground in early trading. Source: Bloomberg   Indices Shares Market trend S&P 500 DAX FTSE 100 Chris Beauchamp | Chief Market Analyst, London | Publication date: Wednesday 28 September 2022  FTSE 100 hovers at July support The index is sitting right at the 7050 support zone, which held back in July. A drop below 7000 marks a fresh bearish development, and would bring the 6874 level into view, last seen in March. Given the recent run of losses we might perhaps expect a rebound of sorts to develop, although for this to happen we would need to see a recovery above 7060, and then on above 7120. A longer-term bounce targets 7500 and then 7570, the highs from September and then August, respectively. Source: ProRealTime DAX probes recent lows There is little sign of a rebound here, with the index still close to Friday’s lows. A move back above the February and June lows of 12,400 would help to provide a more short-term bullish view, although the broader bearish outlook remains in place. Lower highs have been in place over recent months, so it would need a move above 13,500 to put a dent in this outlook. Further declines target 11,700, eating into yet more of the post-Covid rebound. Source: ProRealTime S&P 500 edges up off recent low June’s lows have been reached, after a huge decline since late August. If this level holds then the index may yet be able to stage a short-term bounce, targeting 3800 and then on towards 3900. The bigger bearish view remains intact however, given the lower high at 4127. The next major level to watch is 3582, and then on below that down to 3400. Source: ProRealTime
    • Early Morning Call: Risk assets being beaten up again USD continues to benefit from the market edginess.     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...