‘Things Can Get Ugly’ Analysts Expect Gold Price Next Week

While markets follow the Fed’s tightening policy, cryptocoin.com As a result, we will focus on the question of how much worse the gold price will get in the next week? The persistent inflation narrative forces markets to price the perception of “more aggressive central banks”. Next week there are important announcements from the Federal Reserve and the Bank of England that everyone is listening to.

Where does business go in the price of gold?

Any gains above $1,800 per ounce of gold remain capped. The precious metal, which broke this key resistance level this week, has seen reselling pressure as profit seekers slashed the metal by around 1% this week. Bart Melek, head of global strategy at TD Securities, said, “In the short term, the market expects a discount in November. “I suspect the Fed will trigger gold to some extent,” he said. Melek added that the surprise move made by the Bank of Canada this week to end its quantitative easing program has strained the markets. Melek says: “Gold has been trading in this wide range for a while. We went to $1,806 but are now bearish again. Based on the hawkish surprise of the Bank of Canada, many predict the Fed will do something similar at some point. “People will take positions for a hawkish surprise from the Fed,” he said.

The Fed’s interest rate announcement is scheduled for Wednesday, and markets are predicting the central bank will begin to cut back on $120 billion in monthly asset purchases. According to previous Fed meeting minutes, the “gradual contraction” would begin in November and June. The CME FedWatch Tool also forecasts a rate hike of 47% in June and a second chance of a 40% increase in September. James Knightley, ING’s chief international economist, says:

A contraction announcement now seems inevitable, as officials generally agree that ‘significant progress’ has been made in both inflation and employment. Also, the minutes of the September FOMC meeting outlined a potential timeline to begin in November. Asset purchases decreased by $15 billion each month, with $10 billion split into Treasury and $5 billion in Mortgage Backed Securities. We don’t think rate hikes will be far behind, and markets seem to agree with expected earlier rate hikes in advanced markets.

Global central bank policy

Central banks around the world are also starting to tighten, which is tightening global stimulus. However, OANDA senior market analyst Edward Moya pointed out that markets may be a little too aggressive in forecasting US rate hikes. Moya: “We must remember that before the Fed starts raising interest rates, they must see the unemployment rate continue to fall. The Fed cannot raise rates quickly. You will find that Fed Chairman Powell is extremely cautious about rate hikes. The biggest fear of the financial and monetary support currently available will be a policy error. The Fed cannot let many of these efforts go to waste. The Fed doesn’t want to do anything to derail this recovery. “If they falter, that would undermine their target until the labor market recovers,” he said.

Meanwhile, there has been a mixed macroeconomic data package for gold this week. One narrative that remains constant, however, is the runaway fear of inflation. Moya said this is no longer just an issue in the US or Europe, it’s a global issue. On Friday morning, markets digested Eurozone inflation hitting a 13-year high in October, with the headline figure rising 4.1%.

Moya said in her statement: “This morning, the employment cost index came to the fore. This was the biggest gain since 2001. It is clear that inflation concerns have not waned anytime soon. Right now the market is nervous about what the Fed will do next week. You have a market that is somewhat uncertain about whether inflation will drive growth down over the next few quarters. As for gold, it has struggled to lure investors. The market is still really struggling to justify the increased safe-haven positions.”

Gold needs to stay at this level

Moya said there is a risk of selling gold after the Fed’s announcement next week, adding that the precious metal could see increased volatility and a volatile trading environment. Gold has been trading in a wide range for several months – $1,680-1,840 per ounce. Currently, $1,750 is an important support level to hold, he added. Moya said in his statement: “You will probably see that gold continues to consolidate until the contraction day. There may be a decline after the Fed. That’s when you buy gold. We may see one last big drop next week. Move lower to $1,720 then you would consider scaling below. “If the bottom is bought, it won’t be hard to recapture $1,800 an ounce.” If gold fails to hold $1,784 and then falls below $1,745, things could “get ugly” for the precious metal, said Walsh Trading co-director Sean Lusk. “We could see $1,680 if we don’t hold it,” Lusk said.

i for golddata to monitor

Alongside Wednesday’s big Fed announcement, the Bank of England is scheduled to announce its interest rate decision on Thursday. “The Bank of England is preparing to raise interest rates for the first time since Covid-19,” Knightley said. Markets are fully pricing in the Bank of England’s first 15 basis point rate hike next week. Economists are less confident and consensus is relatively divided. But the message from President Andrew Bailey and his colleagues strongly implied that the Bank did not want it.”

Another key announcement to watch next week will be the US October employment data, with market consensus calls for the additional 413,000 positions to be added and the unemployment rate to fall to 4.7%. Other macroeconomic data to look out for are the US ISM Manufacturing PMI on Monday, ADP non-farm payrolls on Wednesday and ISM non-manufacturing PMI on Thursday, and jobless claims on Thursday.

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