Is gold still supported?
Although the ounce of gold had a rough week, falling almost $50 and experiencing its worst performance since February, we saw a bullish return to the market on Friday.
One of the biggest drivers for the ounce of gold was the strengthening of the US dollar. The price of an ounce of gold has an inverse relationship with the value of the US dollar. The US dollar strengthened in response to the country’s economic data and changed interest rate expectations. But last Friday, the head of the US Federal Reserve said interest rates may not rise much. He is concerned about the credit crunch in the American banking industry. Powell said that “financial stability tools have helped calm the situation. However, the developments in the American banking sector are such that they make financial and credit conditions difficult and will most likely harm economic growth, employment, and inflation. For this reason, perhaps there is no need for a quick and large increase in interest rates. And it happened that on Friday gold was supported in the range of 1950 and now it is trading in the range of 1980.
In the coming week, the FOMC Minutes will be published. In the meantime, the GDP data will be updated and the desired inflation index of the Federal Reserve (PCE) will be at the center of attention.
US federal government debt crisis
This is a sign that the Federal Reserve may keep interest rates on record from June. After the words
The head of the US Federal Reserve, market interest rate expectations were weakened. From the point of view of the market, the possibility of an increase of 0.25 percentage points in the interest rate in June has reached 10%. Before this, the market was preparing to stop interest rate hikes from June. Several officials of the US Federal Reserve have backed away from the idea of stopping interest rate hikes. Even hopes for a rate cut at the end of 2023 have weakened.
Before the words of the head of the US Federal Reserve, the market was preparing for a 0.25 percentage point increase in the interest rate in June and had abandoned the expectation of a rate cut until the end of 2023. For this reason, we saw a sharp fall in the price of an ounce of gold. But it seems that the Federal Reserve Chairman’s comments have caused a change in interest rate expectations.
According to analysts, it is expected that the price of an ounce of gold will experience an upward return from the current levels. However, there is a risk of an ounce of gold falling into the $1,900 range. The first resistance of the market is the 1980 range and then the 2000 dollar range. The support area of the market is in the range of 1960-1950 dollars. If negotiations to increase the federal government’s debt ceiling fail, the price of an ounce of gold could stabilize above $2,000.
Affecting news/events for gold
|466.435||High||USD||Core PCE Price Index (MoM) (Apr)||26/05/2023 12:30 PM||0.3%||0.3%||0.4%|
|466.434||High||USD||Core Durable Goods Orders (MoM) (Apr)||26/05/2023 12:30 PM||0.2%||-0.2%|
|466.413||High||USD||Pending Home Sales (MoM) (Apr)||25/05/2023 02:00 PM||-5.2%||0.5%||0.0%|
|466.406||High||USD||GDP (QoQ) (Q1)||25/05/2023 12:30 PM||2.6%||1.1%||1.3%|
|466.409||High||USD||Initial Jobless Claims||25/05/2023 12:30 PM||242K||250K||229K|
|466.392||High||USD||FOMC Meeting Minutes||24/05/2023 06:00 PM|
|466.381||High||USD||Crude Oil Inventories||24/05/2023 02:30 PM||5.040M||-0.920M||-12.456M|
|476.167||High||USD||Fed Chair Powell Speaks||23/05/2023 04:30 PM|
|466.331||High||USD||New Home Sales (Apr)||23/05/2023 02:00 PM||683K||663K||683K|
|466.329||High||USD||Services PMI (May)||23/05/2023 01:45 PM||53.6||52.6||55.1|