The price of gold remains stable around $ 1970 USD
Gold witnessed moderate / limited price action this morning and remained confined to a tight trading band around the $ 1970 USD area at the start of the European session.
Despite the fact that the US core CPI eased for the second consecutive month in March, markets appear confident that the Fed will tighten monetary policy at a faster pace to curb the surge in inflation. This, combined with a good rebound in US Treasury yields, acted as a drag on the price of gold.
- The price of gold damps some of Tuesday’s bullish momentum.
- The US dollar remains on a solid footing and has limited the rise in the price of gold.
- Ukraine’s geopolitical risk provides some support for precious metals.
“Fed Governor Brainard (governors always vote) reiterated that inflation control is the priority of the FOMC,” explained a Westpac analyst.
“Some tightening of financial conditions is expected to help moderate demand, while also easing supply constraints, with the combination helping to reduce inflation. He welcomed the moderation in commodity prices in the March CPI report, but also warned against putting too many stocks in a given. “
A 50 basis point hike is expected next month to potentially hold the US dollar index (DXY) on track for a March 2020 high near 103.
The DXY index already printed a new cycle high that day at 100.333, which was seen as another factor blocking the rise in US dollar-denominated gold.
The decline, however, remains tempered by concerns about continued rising inflationary pressures, which tends to strengthen the metal’s attractiveness as a hedge against rising prices.
Indeed, the major US CPI showed no signs of easing in March and accelerated to levels last seen in 1981.
In addition to inflation hedges, gold continues to benefit from heightened geopolitical risks and Russian President Vladimir Putin has raised the temperature on this.
Putin said on Tuesday that peace talks with Ukraine have stalled. Instead, Putin promised that Russia would achieve all of its “noble” goals in Ukraine. “We are back to a winless situation for us again,” Putin said at a press conference during a visit to the Vostochny Cosmodrome 3,450 miles (5,550 km) east of Moscow.
“We do not intend to be isolated,” Putin added. “It is impossible to seriously isolate anyone in the modern world, especially a country as large as Russia.” This should support gold prices in 2022.
Technical analysis of the gold price
Gold has been trading in a range since mid-March, and if that consolidates the 2022 rally, the price could now mature for a bullish continuation according to the daily chart.
We have seen a breakout attempt, but of course a pullback occurs and the question is how much the price can dampen the bullish momentum before the bulls return.
However, should a strong US dollar prevail, the $ 1930 USD level could come back into focus and if this level were to break, the near-term outlook for an upward move would be severely diminished.
Par Ross J Burland, FXStreet
Ross Burland began his Forex career from the City of London in 2001. Initially employed by the FX department of Sucden (UK) Ltd as Corporate Sales and Junior Dealer (an FSA qualified investment advisor), Ross eventually performed the FX spot institutional on the market. – doing a desk prior to being hired to join Investec Bank’s FX department on Gresham Street in a client sales / trading role, specializing in corporate liquidity management and specialist finance.
The views expressed herein are those of the author only and do not necessarily reflect the views of Forex Quebec. Every investment and trading move carries risk, you should do your research when making a decision.
Disclaimer: The information and opinions contained in this report are provided for general information purposes only and do not constitute an offer or solicitation to buy or sell foreign exchange contracts or CFDs. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, and assumes no responsibility for any direct, indirect or consequential damages that may arise from the fact that someone relies on such information.