Fundamental View
Buyers of gold in recession, or sellers of it for a stronger dollar?
Volatility in the bond market and uncertainty about interest rate cuts are pushing the dollar higher, dimming the appeal of gold (XAU).
Last week, the recovery of the US dollar affected the price of gold (XAU) and put pressure on gold. Because market participants assessed the possibility of the Federal Reserve raising interest rates in May. However, there are still many buyers and markets for gold, who see the fear of stagnation more strongly.
Now for this week. There are many things in the US economic calendar that will help traders know what to expect from the Fed. Investors are monitoring Economic growth data (GDP), jobless claims on Thursday, and PCE data on Friday. The GDP print is expected to grow at an annual rate of 2.0% during this period, which means that a recession is not imminent. And If the PCE index prints much higher than expected, it reduces the likelihood that the Fed will hold off on rate hikes in May, especially if economic data is generally positive.
With this data, Investors evaluate the interest rate increase in May. Although the market expects a 25 basis point hike on May 3, uncertainty surrounding the possibility of a rate cut this year has caused volatility in the US bond market. The volatility of the bond market causes the dollar to move.
The market is currently looking at a 25 percent hike, with the direction of travel determined by whether the Fed will hold off on interest rate changes after that. While this could support gold prices, the recent market rally and overly technical conditions mean there is still scope for a downside if the Fed’s rate outlook is confirmed. According to the CME FedWatch tool, there is an 84.6% chance of a 25% rate hike in May, with interest rate cuts expected later in the year. Higher interest rates reduce the attractiveness of non-yielding bullion.
Technical View
Gold has taken a downward trend in the four-hour time frame. This precious metal has locked itself in the $1960 to $2020 area. It shows that gold needs some drivers to rise or fall. Any sign of information that leads traders to fear further recession could push gold to the $2020-$2048 highs. But what we think is the better-than-expected print for the US economy makes more downward pressure on XAU.
Gold is currently trading at the price of $1982 dollars and is on a dynamic resistance. There is a possibility of a slight rise for gold at the beginning of the week, but we don’t have any rush to trade. If the economic data encourages us to sell gold, we will wait and do it in the $2000 to $2020 area, and if we going to buy gold, we will do it in $1960 or in the important key area of 1920 dollars.
Calendar events
Affecting news/events for gold
Thu Apr 27:
🇺🇸 USD Advance GDP q/q and Unemployment Claims
Fri Apr 28:
🇺🇸 USD Core PCE Price Index and USD Employment Cost Index
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