On Monday (January 9), the U.S. dollar index maintained its downward trend in early trading in the European market, while spot gold continued to rise in the short term. It broke through the $1,880/oz mark during the session, and finally closed at $1,871.40, a day-to-day increase of 0.32%.
On Friday, the dollar suffered its biggest drop in more than three weeks as U.S. economic data prompted some traders to bet on a small rate hike from the Federal Reserve ahead. Data released on Friday (January 6) showed that U.S. wage growth slowed in December, coupled with a contraction in service sector activity in December, pushing gold prices up more than 1.8%.
Traders this week turned to speeches from Fed Chairman Jerome Powell and the upcoming U.S. consumer price index for more clues on the pace of rate hikes. This week’s CPI data will be key. Another slowdown in price pressures could boost demand for gold, while the dollar remains under selling pressure. However, a surprise rise in CPI could rattle market sentiment. As for the speeches of important Fed officials (including Chairman Powell) this week, it may also cause market volatility.
On Monday, the president of the San Francisco Fed said that while it was too early to declare victory in controlling inflation, the Fed was still considering adding just 25 basis points at its January meeting. But she stressed that eventually the Fed will increase interest rates above 5%.
It is not difficult to see from the trend of the financial market that the market believes that the Fed is just “bluffing” because the market is now pricing the Fed’s interest rate to peak at 4.93%, and it is beginning to imagine that it will start to cut interest rates in 2023 because of the recession, leading to early relaxation of financial conditions, which is equivalent to helping the Fed in advance The interest rate was cut from the market expectation level. In order to achieve the goal of controlling inflation, the Federal Reserve must insist on talking about loose expectations on the surface.
Then it is expected that the Fed Chairman Powell’s speech on Tuesday will not have any surprising content. It is highly likely that the adjustment of future interest rates will be determined based on the development of inflation data. But if Powell unexpectedly expresses a dovish easing intention, it will inevitably push gold to climb higher.
On the technical level, judging from the closing situation of the daily line, with the conversion of yin and yang, Lianyang cooperates with Xiaoyin to correct and then rises further, but the overall trend is upward, and the moving average indicators are scattered to form support. A stable support point, after the stabilization, continue to look upwards and approach the $1,900 mark. The short-term 4-hour chart shows a slight pause after Lianyang’s heavy volume, which may lead to a short-term retracement. The top-to-bottom transition level of $1,860 is the initial support position, followed by $1,840. As long as gold remains above the above-mentioned support level in the near future, a higher market outlook can still be expected.
Wang Gang, Guangdong Branch, Bank of China
Opinions are personal and do not represent those of the organization