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On September 15th, oil prices continued their upward trend in the afternoon, driven by the risk of Russian supply disruptions caused by increased attacks on key Russian energy facilities in Ukraine and President Trumps call for NATO to stop purchasing Russian oil. HSBC senior analyst Kim Fustier stated, "If India reduces its Russian oil imports, the surplus, estimated at 500,000 to 1 million barrels per day, could flow to Southeast Asia, Turkey, Africa, and other regions... The market will reach a new equilibrium through adjustments in trade flows and rising logistics costs. Only a permanent decline in Indian purchases of Russian oil, exceeding 1 million barrels per day, would ultimately lead to a net reduction in global crude oil supply."On September 15th, the market widely expected the Federal Reserve to announce an interest rate cut on Wednesday. HSBCs Paul Mackel stated that unless the Fed signals the possibility of more rate cuts in the future, the US dollar may see a brief surge following the announcement. He noted that the Fed would need to meet extremely high conditions to further boost already high expectations for a rate cut. Data from the London Stock Exchange Group shows that the market currently expects the Fed to have cut interest rates by approximately 140 basis points by the end of 2026. Against this backdrop, the US dollar may see a short-term surge following Wednesdays announcement. However, Mackel believes that any gains in the US dollar are likely to be temporary, given the prospect of faster rate cuts in the future, especially if employment data remains weak.Russian President Vladimir Putin: Russias GDP has grown by 1.1% in the past seven months.The director of the Congressional Budget Office (CBO) said President Trumps tariffs appear to have pushed up inflation more than CBO analysts initially expected.Israeli Prime Minister Netanyahu: Some Western European countries have stopped arms shipments.

Forecast for the price of gold: Pre-NFP trade slowdown around $1,790 according to XAU/USD

Alina Haynes

Aug 05, 2022 15:08

 截屏2022-08-04 下午5.25.46_1024x576.png

 

As traders exhibit the normal concern ahead of the important US employment data on Friday, the price of gold (XAU/USD) seesaws near the monthly peak. Despite this, the price of yellow metal fluctuates between $1,788 and $1,791 as of the morning of the press in Europe.

 

The market's conflicting fears about the global recession and the most recent geopolitical stories affecting Taiwan, in addition to the pre-NFP caution, further contribute to the XAU/USD's movement. It's important to note that the options market sends conflicting signals and presents difficulties for gold purchasers.

 

The recent increase in US Treasury rates has helped to strengthen the US currency and put downward pressure on the price of gold, but it also seems to have lessened concerns about a global economic downturn.

 

The US Dollar Index (DXY) reverses a two-day slump and registers modest gains at 106.00. The dollar index declined during the previous two days before consolidating recent losses by monitoring the yields. It's important to note that after falling during the previous two days, the US 10-year Treasury rates have stabilized at roughly 2.069 percent. The disparity between the coupons for 10-year and 2-year bonds is still the largest it has been since 2000, yet US Treasury rates have continued to show the possibility of a recession.

 

Geopolitical issues from the Taiwan Strait are also a problem for gold purchasers elsewhere, as China expresses its displeasure with Nancy Pelosi, the speaker of the US House of Representatives, visiting Taipei. According to West Official, US Secretary of State Antony Blinken recently stated at an East Asia meeting that China's response to US House Speaker Nancy Pelosi's visit to Taiwan had been "flagrantly aggressive."

 

In terms of the options market's attitude, a one-month risk reversal (RR) of gold prices ends a three-week downturn when seen weekly, but if observed daily, it causes a third straight day of decline. It should be mentioned that the risk reversal term refers to the spread between bullish and bearish bets, namely the call options and put options (RR).

 

In conclusion, gold prices are still stable, but the bad news outweighs the good news, therefore today's US employment data for July will be important for the short-term outlook. The US dollar's recovery may continue and impact on gold prices if the employment numbers look to be higher than expected.


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