The Fed acts strongly, gold enters a strong rally
Gold price on the rise for the 2nd week in a row, the statistics are in favor of gold prices. However, the Fed still does not stop tightening interest rates, gold is at risk of turning down.
Gold price is making a solid comeback after finding strong support from the USD, having reached $1,840 in two trading days over the weekend. The precious metal hit a two-week high on its way to recovery.
Meanwhile, the dollar is struggling for more recovery amid mixed market sentiment and falling Treasury yields. The decline in US GDP, manufacturing PMI and home sales suggest signs the US economy may be in a recession, dampening expectations of a sharp Fed rate tightening, keeping the dollar under widespread decline.
This week’s turn in global equities is also weighing on the greenback’s safe-haven appeal, benefiting gold prices against the dollar.
Manufacturing and Non-Manufacturing Project Management Institute (PMI) data will be included in China economic rankings on Tuesday. Both of these data correctly forecast that gold will recover in May after a significant drop in April.
In the event that the PMI data falls short of market expectations, warning investors of the negative impact of the Covid-19 epidemic in China, then gold is likely to lose its appeal.
In addition, the European Statistics Authority (Eurostat) is expected to release inflation data for the euro area. Last week, several European Central Bank (ECB) policymakers said a 50 basis point rate hike would not be on the table at the July policy meeting. If ECB-led investors double interest rates based on hot inflation data, the dollar will continue to weaken.
Next Wednesday, the Institute of Supply Management (ISM) from the US will closely monitor market participants who are concerned about a possible recession in the US. If this data shows that business activity in the manufacturing sector continued to expand at a strong pace in May, the greenback could build momentum and limit gold’s upside.
The US Bureau of Labor Statistics will release the May jobs report on Friday. Forecast, strong wage inflation could be seen as a factor for consumer inflation to continue at high levels for longer, investors should consider the Fed’s willingness to tighten its policy. In that scenario, gold could turn lower amid a recovery in US bond yields.
Speaking of yields, 2.7%, which is the 23.6% Fibonacci retracement level of the uptrend that began in December, is seen as a key technical level for US 10-year bond yields. If that support fails, a sharp drop in US yields could open the door for a rally in gold.
The market still needs a clearer signal about the possibility that key economic numbers are getting so bad, that the Fed is still getting worse, said Stephen Innes, managing partner at SPI Asset Management. think of a pause in tightening monetary policy. For now, gold investors remain reluctant to push prices higher.
According to Mr. Stephen Innes, if the Fed still stops raising interest rates, gold will go much higher. But until they actually do, the precious metal will mostly only trade within a certain range.
Ngoc Cuong
at Blogtuan.info – Source: vietnamnet.vn – Read the original article here
