The gold market closes the week with another big move. Gold, which hit its highest level in the last 13 months on Thursday, fell $40 on Friday, giving back all its weekly gains.
That’s why gold was sold
At the macro level, the gold market is reacting to positive economic news and some hawkish Federal Reserve speeches. Edward Moya, senior market analyst at OANDA, comments on the latest developments as follows:
Today, not only data, but also banks began to report their earnings. JPMorgan smashed with record revenue. Wells Fargo’s numbers were pretty good. Deposits were good. It seems that one of the big risks may not be emerging right now. You’re looking at an economy that’s still a little bit surviving. Then came the hawkish statements from the Fed. That’s why gold was sold.
Things might start to break soon!
The thought that the Fed could somehow make a soft landing encouraged profit-taking after gold hit $2,063 this week (just inches away from record highs). Moya said, “This view is a bit too optimistic, but that’s the market’s view at the moment. “From how much the Fed cuts at the end of the year, we started focusing on the possibility of a hike in June,” he says.
However, hawk sentiment could quickly dissipate with more macro data. According to Moya, monetary policy is acting lagged and with the restrictive zone we’re seeing, things may start to break down soon.
Only then will gold react to the Fed.
Everett Millman, precious metals specialist at Gainesville Coins, says the latest producer price index figures show that inflation may have peaked, giving the Fed pause after a 25bp increase in May. In this context, Millman makes the following statement:
If inflation is falling and banking problems persist, the Fed has little reason to stay off the pedal and hike after May. During the 2-3 May meeting, gold will only respond if there is an immediate rate cut or 50 basis point increase. Both are unlikely.
Fed speakers continue to look hawkish
The Fed will only need one more rate hike, Atlanta Fed President Raphael Bostic told Reuters on Thursday. “The latest data points are consistent with our action once again. “There’s a lot of momentum that shows we’re on the road to 2%,” he said.
By contrast, Federal Reserve Chairman Christopher Waller said on Friday that little progress has been made on inflation and rates will need to rise further. Waller said inflation “basically moves sideways with no apparent downward movement. In addition, “Monetary policy needs to be tightened further. “How much tightening will depend on future data on the extent of the tightening in inflation, the real economy and credit conditions,” he said.
This will support the gold rally in the long run.
cryptocoin.com As you can follow, technical factors played a major role in the sale of gold on Friday and a large number of profit takings surrounded the market. Michael Boutros, senior technical strategist at Forex.com, comments:
This is more of a technical sale than anything else. Suppressed long positions appear. But price pullbacks should be limited. The war is still on and there is a devaluation of the dollar as a global standard. This will help the gold rally survive in the long run.
Boutros is looking at the April opening level of $1,966 as support. “If we hold this support, there will only be a small pullback for gold,” the strategist says.
According to Everet Millman, key support levels for gold are around $2,015 and $2,000, and resistance is around $2,070, an all-time high. “If we go below $2,000, there is no clear support level,” Millman said. Gold can go as high as $1,900,” he predicts.
Next week’s focus will be on bank earnings, including Goldman Sachs and Bank of America. “I predict all of these will be bullish for the yellow metal,” Moya said. We will see the markets continue to be volatile,” he comments.
Gold weekly technical analysis: We have a long road ahead!
Technical analyst Christopher Lewis illustrates the technical outlook for gold this week as follows. Gold markets initially rose slightly during the trading week, reaching $2,050. However, we saw the market bounce right back and form a shooting star, which indicates that our momentum is running out. It’s worth noting that this is an area where we’ve seen much of the selling pressure in this general environment before. Therefore, it should not be forgotten that there is a lot of technical exhaustion just above. If we dive below the lower part of the candlestick, we might be looking at the $1,950 level.
We’ll see if we reach a ceiling again. But we got here pretty quickly, and it’s probably worth mentioning how much gold dropped on Friday. This is clearly a very negative sign. So I think it’s a situation where we continue to see a lot of noise. Ultimately, however, this noise should be considered an opportunity to gain value in the dips if we continue to see the same behavior more and more.
We have a long way to go before people stop using gold, which has been in vogue for some time, to protect their wealth. That being the case, it will continue to see plenty of interest under the market, so even if we sell here, at least as it stands now, it’s worth considering that it’s a short-term opportunity rather than a long-term trend change.
Next week’s data
- Monday: NY Empire State manufacturing index
- Tuesday: US building permits and housing starts
- Thursday: ECB meeting minutes, US jobless claims, Philadelphia Fed manufacturing index, US existing home sales,
