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On September 2nd, Federal Reserve Chairman Williams stated that bond yields are an important indicator for the Feds assessment of the economic situation. The recent rise in yields was primarily driven by strong economic performance, an optimistic economic outlook, and robust investment demand, with some correlation to the Middle East conflict. However, yields currently do not appear to be significantly affected by the inflation outlook. Williams emphasized that the Fed will consider all economic data comprehensively, and its ultimate responsibility remains price stability, with reducing the inflation rate to 2% being the top priority. Tariffs and the Middle East war are the main factors contributing to current inflation exceeding the target, but a second-degree inflation effect from tariffs has not yet been observed. Inflation expectations remain under control, and recent inflation data is encouraging, showing an overall downward trend, although inflation in the services sector remains significantly high. He stated that the labor market is stable and remains robust, and it is necessary to push inflation back to 2% in the foreseeable future. He hopes to further observe and analyze economic data before making the next policy decision and will continue to gather information for the next FOMC meeting. Williams expressed support for the decisions of the July FOMC meeting, believing that the current interest rate level is appropriate and monetary policy is progressing smoothly.Tensions in the Middle East remain high, with Brent crude oil prices nearing the $96 mark during trading. A chart provides a quick overview of the pre-market conversion prices of crude oil between domestic and international markets.The US August ADP employment figures were released, showing the smallest increase since January and falling short of market expectations. A quick chart provides a view of the converted prices of gold and silver in the pre-market session.Syria has confirmed to the International Atomic Energy Agency that it will participate in a briefing on nuclear issues from September 7 to 11.As of 20:30 Beijing time, New York gold futures rose 0.17%, New York silver futures rose 0.60%, and New York copper futures rose 0.19%.

Forecast for the price of gold: Buyers of XAU/USD approach $1,800 on a weaker DXY ahead of US inflation

Alina Haynes

Aug 09, 2022 15:27

 截屏2022-06-07 下午5.14.47.png

 

The price of gold (XAU/USD) rose recently on the strength of a weaker US dollar and softer yields before rounding up to $1,790 on Tuesday during the first Asian session. The key started the week's trading on a strong note but fell by the end of the day, thus the metal's rising trajectory also borrowed ideas from equities.

 

US Dollar Index (DXY) followed Treasury rates to maintain Friday's significant gains, giving the greenback measure its first positive weekly result in three weeks. However, the US 10-year Treasury yields decreased by over seven basis points (bps) to 2.75 percent at the latest, following a 14-bps run-up on Sunday, while the DXY reported a 0.19 percent daily loss to 106.37 by Monday's conclusion.

 

The market's possible indifference to the US-China disputes over Taiwan and China's strong July trade figures may also work in the purchasers' favor. Despite this, the dragon country continues to conduct military exercises close to the Taiwan border, despite recent US signals to the contrary. China's trade statistics for July are also included. Compared to predictions of $90 billion and $97.94 billion, the overall trade balance increased to $101.26 billion. More information indicates that imports fell to 2.3 percent compared to 3.7 percent predicted and 1.0 percent prior, and exports rose by 18 percent, below expectations of 15 percent and 17.9 percent, respectively.

 

However, it's important to note that rising hawkish Fed bets and the Fed's policymakers' support for the rapid rate hikes put the XAU/USD bulls under pressure. Despite this, following the positive US jobs report for July, interest rate futures indicated a 73 percent possibility of a 75 basis point rate hike by the Fed in September. The headline Nonfarm Payrolls (NFP) increased to 528K, exceeding the 250K expectation and the 398K previously upwardly revised. Additionally, the unemployment rate decreased slightly to 3.5 percent from the predicted and previous readings of 3.6 percent.

 

Following the release of the data, San Francisco Fed President Mary Daly stated over the weekend that the Fed's fight against inflation was far from over. The policymaker also stated that a 50 bps increase was unquestionably in the cards. We must have an open mind. Fed Governor Michelle Bowman echoed this sentiment when she stated that the Fed "should consider additional 75 basis-point interest rate hikes at upcoming meetings in order to bring excessive inflation back down to the central bank's target."

 

Future gold buyers may benefit from the weakening US dollar as well as the technical information provided below. The US Nonfarm Productivity and Unit Labor Costs for the second quarter will be crucial to monitor (Q2). Forecasts indicate that US Nonfarm Productivity may increase to -4.6 percent from -7.3 percent before, while Unit Labor Costs may decrease to 9.5 percent from 12.6 percent previously. Additionally, news about Russia and Taiwan will be crucial for obtaining precise instructions.

 

The price of gold not only recovered from a crucial short-term support line, but also crossed the 50-DMA for the first time since late April on a daily closure. In order to inspire confidence in purchasers, the rising rise takes cues from the higher RSI (14), which is not overbought, as well as positive MACD signals.

 

Having said that, the XAU/USD buyers are prepared to push through the $1,802 Fibonacci retracement of the April-July slide to reprise the monthly high near the $1,800 mark.

 

But beyond that, a downward-sloping resistance line from mid-June, near $1,827, would pose a problem for the gold bulls. The metal's short-term downside might be constrained by the 50-DMA and the aforementioned support line, which are respectively located near $1,786 and $1,780.

 

The 21-DMA and the 23.6 percent Fibonacci retracement level, which are located at $1,755 and $1,741 in that order, could then catch the attention of the XAU/USD sellers. Overall, the price of gold seems poised to build on recent gains and move closer to the 1.5-month-old resistance line.


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