- Gold moves on the weakness of the US dollar after Powell’s testimony.
- Gold is trading between two levels of resistance and support, at $ 1,810, or above, below and $ 1,875, or around.
At $ 1,840, the gold price is slightly lower than the peak but still, the bulls are up 0.4% on the day. The price has so far traveled between $ 1,823.45 and the high of $ 1,847.93. US Treasury yields and the US dollar threat have increased amid rising recession concerns, but it has begun to give up early returns as investors move to US stocks and risk assets despite higher interest rates.
Bond yields fell ahead of Federal Reserve President Jerome Powell’s testimony to Congress, and his issuance has been taken as a low haul. The soft yield is bullish on gold as the yellow metal does not give any interest. The yield on the US 10-year note last decreased from 3.8% to 3.156%, down from a high of 3.283% to 3.124%. Meanwhile, the US stock markets reversed course and moved higher from the initial loss, with the Dow Jones 0.6% and the S&P 500 index finally gaining 0.75%. NASDAQ is up 0.9%. The US dollar fell 0.3%, as measured by the DXY Index, to 103.858 below 104.95.
Federal Reserve Chair Jerome Powell said the US Central Bank was “strongly committed” to reducing inflation, but there was a sigh of relief that Powell was no more hockish when the Fed raised its benchmark overnight interest rate by three quarters. Percentage point, its largest increase since 1994.
When Powell said the Fed was strongly committed to returning inflation to its 2% target, he did not say that the commitment was unconditional, as reported by Monetary Policy last week. Additionally, during the questionnaire they tried to convince the audience that a soft landing was possible, but price stability is now their priority. However, the fear of recession is on the rise.
Analysts at TD Securities noted that it was supporting gold bugs that were looking for a rise in the market price for the Fed hike. “Markets are reducing the recession on the horizon, which has historically led to a pivot in Fed policy. However, this hiking cycle differs from recent historical analogies because the Fed’s ability to control inflation is limited because supply-side disruption.
” In turn, gold bugs deprive potential stable results of low growth but central banks should continue to raise rates even as long-term inflation faces a credibility crisis. In this scenario, the price of the Fed pivot is less correlated with recession odds than in previous episodes, ”the analyst further explained.
“In the immediate term, CTA trend followers are also backing yellow metal, after Chair Powell deftly prepared the gold sales-news rally after the 75bp hike, which has sparked CTA trend followers.
Technical analysis of gold
The description on the 4-hour time frame identifies areas of liquidity in order blocks (OBs), or areas where demand and supply are expected to be lowered, and the price still inadequate (PI), or ‘price imbalance’ (mis-match in bids and offers). This leaves the price trapped between $ 1,810, or below it, $ 1,875, or upwards.
The nearest demand area, or order block, is about $ 1,826. There is a price imbalance between there and the current spot price, which can be mitigated in the near term, drawing the market towards the demand sector. If the bulls are committed, there is a chance for greater movement toward the upper imbalance areas on the way to $ 1,875.