Gold prices continue to face pressure near higher levels and fluctuate in the $1,750 to $1,770 range. According to market analyst Ross J Burland, many factors are contributing to the downward move in the precious metal, including a stable US dollar, higher US Treasury yields and weekly stock gains.
“The recent decline in stocks provided support for gold”
US dollar index (DXY) remains strong near 94.10 with slight losses. A higher dollar price makes gold more expensive for other currency holders. Yields on the US 10-year Treasury bond rose to 1.61% despite disappointing NFP data as investors continued to worry about sustained high inflation and the Fed’s early taper expectations in November. According to Ross J Burland, however, the recent decline in equities has given the precious metal lower levels of support, signaling investors’ risk aversion.
cryptocoin.com As we reported, gold prices in the Asian market on Monday took a step back as DXY entered bullish territory. However, at the time of writing, gold was trading at $1,754.77, up 0.04% daily.
Will the NFP report have an impact on the Fed’s rate hikes in 2022?
Nonfarm payrolls increased by 194,000 jobs last month, the U.S. Department of Labor said in Friday’s employment report. Economists surveyed by Reuters had predicted payrolls would increase by 500,000 jobs. The US dollar was largely unmoved by the disappointing US Employment report on Friday. Investors said the low numbers wouldn’t stop the Federal Reserve from starting to cut its asset purchases as early as November.
Data indicate that the winter period may be slower in terms of growth, but inflation pressures are expected to continue. Analyst Ross J Burland says this means that despite a potential slowdown, the Federal Reserve will try to start the tapering process by the November 2-3 policy meeting. The evaluation of TD Securities analysts is as follows:
The jobs report came in well below expectations, easing the excitement over the Fed’s rate hikes in 2022, while questioning the timing of the well-known November tapering.
“Stagflation risks are positive for gold prices”
TDS analysts interpret the expectations of the Fed’s stance and the reaction of gold prices to it as follows:
While tapering is a foregone conclusion, there may be some short closings following the aggressive flows associated with pricing a Fed exit in November. Looking beyond Fed pricing, higher wages and no increase in participation seem to keep the stagflation theme alive. Gold can be an ideal hedge against these rising stagflationary winds.
From another angle, analysts also consider the intensifying global energy crisis. Analysts explain that this “affects the production of goods worldwide and supply chains in Europe and Asia, so the reasons for owning the yellow metal are becoming increasingly compelling”:
Indeed, price movements in the last trading sessions show that global macroeconomic indicators are beginning to dampen the effects of the energy crisis, as these concerns fuel fears of slowing demand and rising inflation. After all, while the Fed’s rate hike was driven by real rates, it is now driven by breakeven. This shows that the market is pricing in higher inflation due to the increase in energy prices. But he acknowledges that it was a supply shock and that it had a negative impact on growth.
With increasing shorting, including CTAs, in the yellow metal, the potential strength of gold due to the growing stagflationist narrative could lead to aggressive shorts on the horizon, according to TDS analysts.
Gold prices technical analysis
Market analyst Ross J Burland states that gold prices are preparing to move upwards from daily support and makes the following analysis:
Considering the daily bullish close to the support and wick, expectations are for this to be filled with price action over the next few sessions. The target for gold prices is based on the -272% Fibonacci retracement of the 50% average reversal and correction range. This comes in at 1,790 on the way to gold’s 200-day moving average where the previous structure converges.
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