In the past week, the gold market experienced a noticeable downturn due to a variety of factors, including geopolitical tensions and U.S. economic data releases. Here’s a comprehensive overview of the recent trends and the market outlook for gold:
Impact of Geopolitical Easing
Gold prices retreated from recent highs at the beginning of the week, primarily influenced by a reduction in hostilities between Iran and Israel. This de-escalation in the Middle East led to decreased demand for safe-haven assets like gold, as immediate fears of conflict subsided.
U.S. Economic Indicators and Federal Reserve Policy
The release of the U.S. Personal Consumption Expenditures (PCE) inflation data revealed persistent inflation pressures. This data prompted market participants to adjust their expectations, foreseeing the Federal Reserve maintaining higher interest rates for a longer period, rather than cutting rates. The sustained strong economic performance of the U.S. economy suggests its ability to withstand prolonged higher rates, which typically reduces the appeal of non-yielding assets like gold.
Treasury Yields and Market Sentiment
Following the easing of Middle East tensions, U.S. Treasury yields rose, signaling a renewed interest in riskier assets. This shift in investor sentiment reflects a broader market adjustment, with the dollar maintaining strength and European bond yields experiencing modest increases. Such conditions typically divert investment away from gold and into assets that benefit from a higher yield environment.
Short-Term Market Forecast
In the short term, the outlook for gold remains bearish. The upcoming week is set to be packed with critical economic indicators that will likely influence the Federal Reserve’s interest rate decisions. Key indicators such as employment cost figures, the CB Consumer Confidence Index, ADP nonfarm employment figures, JOLTs Job Openings report, unit labor costs, nonfarm productivity data, average hourly earnings, and nonfarm payrolls are expected to play vital roles in shaping the market sentiment.
The prevailing market expectation suggests that interest rates will likely stay at 5.50%, favoring a stronger dollar and potentially diminishing the appeal of gold. Investors should brace for potential declines in gold prices as the market environment continues to favor riskier assets and a stronger dollar over traditional safe havens like gold.
In conclusion, the recent downturn in gold prices, influenced by geopolitical easing and U.S. economic data, has set the stage for a bearish outlook in the short term. Investors are advised to closely monitor the evolving market conditions and be vigilant for potential shifts in demand for gold.
View on Gold for next week
*Gold published red candlestick on a daily map although managed to recover some of its losses. I believe, XAUUSD is going to trade in range around $2,250—$2,350 over the coming weeks.
This is what I anticipate gold to do over the coming weeks.
*Last week $2300 played the key 2- 3 times and did go below but could not manage to take this out. Still closing was over $2325 which is still positive for gold.
*All eyes would be on FED decision which could be more hawkish have seen before so till Thursday morning nothing major will be and post that we might see some downfall.
*In India Wednesday is a vacation and numerous countries will be on vacation leading lower volume could see huge movement. Till Thursday is delicate to see $2290 getting broken so work with range $2350—$2300 till Thursday. also $2250 could be opened.
*For this week XAUUSD $2300—-$2350 and MCX level 71100—71700. Once this is broken XAUUSD $2275—$2400 and MCX level 69900—72800. This week is set in direction so be careful.
NOTE- XAUUSD…. Be ready for a new directional view which will set in post the FED meet is done. Be careful as vacation, numerous data, too numerous effects passing.
Happy Trading!
Commodity Samachar
Learn and Trade with Ease
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