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XAUUSD Analysis on D1 Chart.GOLD FUNDAMENTAL FORECAST: BULLISH _Gold bulls scored a second weekly win despite Treasury yields briefly surging _The Russia-Ukraine border situation is offering a geopolitical tailwind to bullion _FOMC and PCE data are likely to inject volatility into markets - will it help XAU? Gold bulls scored another win last week, with XAU/USD rising nearly a full percentage point, pulling the yellow metal’s monthly gain performance into positive territory. Treasury yields pulled back across the curve into the weekend. The 10-year Treasury yield hit the highest level since January 2020 before bond buyers stepped back into the market. A deep pullback in high-beta equities occurred amid the Treasury rout, with stock traders likely trimming growth forecasts amid a tighter outlook on Fed policy brought on by persistent inflation. Speaking of inflation, breakeven rates – the gap between nominal and inflation-indexed yields – fell, with the 2- and 5-year measures outpacing longer-term measures. A drop in breakeven rates is generally bearish for gold prices, given the yellow metal’s inflation-hedging appeal. The 2-year breakeven rate, which measures what markets see inflation at 2 years out, fell to around 2.35% from 2.47% through the week. That suggests another factor was at play for encouraging the gold buying seen last week. The most likely factor is the increasingly tense situation on the Ukrainian border. Gold appeals to investors as a hedge against volatility. A Russian invasion of Ukraine would certainly qualify as an event worthy of inducing a potentially tremendous amount of uncertainty in markets – and traders hate uncertainty. The Russia-Ukraine situation’s influence on gold is simple: if tensions increase, gold likely gets a boost and vice versa. However, several economic events this week are also front and center for bullion traders. The Federal Reserve’s first rate decision of the year is set to cross the wires on Wednesday. Traders will key in on Fed Chair Powell’s commentary given that a rate liftoff isn’t expected until March. Mr. Powell’s words over the balance sheet will be put under a microscope. The Fed Chief may also push back on the view that the central bank may increase rates four times this year – which is likely too aggressive in his view. A tempered rate hike outlook could offer a tailwind for XAU prices. That tailwind may receive a boost later this week when US inflation data receives an update via the personal consumption expenditures price index (PCE), set to cross the wires Thursday. The Fed has already capitulated that inflation is stickier than previously thought, so even a hotter-than-expected print may do little to firm up the hawkish stance among FOMC members. However, higher inflation could certainly support gold’s inflation-hedging appeal, especially if it follows a Fed event that trims rate hike expectations for this year.
OANDA:XAUUSDLong
by charliedavies770
XAUUSD Analysis on H4 Chart.Gold prices are nearing a key spot on the chart as Silver prices have already broken-out to fresh highs. It’s perhaps the backdrop with which these breakouts have shown that make the matter most interesting. Yields remain elevated and stocks are on their back foot; rates markets are pricing in as many as seven hikes out of the Fed this year with a median expectation for four 25 basis point adjustments. And while there’s been a lot of talk about Bitcoin replacing Gold as an inflation hedge, well that’s down, too, threatening to breakdown below the 40k support that came into the picture earlier in the week. Next week brings the FOMC for the January rate decision and while there’s scant expectation for any actual moves at this meeting, the focus is on whether or not the bank highlights a March rate hike along with how they signal their plans for later in the year. Perhaps the bigger question than even rate hike policy is the prospect of Quantitative Tightening, in the event that the Fed looks to whittle down the massive balance sheet that’s been accumulated since Covid came into the picture almost two years ago. At this point, QE is set to end in March – right as markets are looking for that first hike out of the FOMC. But, will the bank also take the next step in that direction by allowing bonds in their portfolio to mature without being replaced? GOLD NEARS BREAKOUT AT 1850 Gold prices have been building in a bullish channel ever since the December FOMC rate decision. That channel was buffered by a big spot of resistance at the 1830 spot on the chart and failed to break through after three attempts in the early-part of the year. But, the 4th time was the charm when bulls pressed the bid yesterday. And that breakout still has yet to stop, as there’s been a mere pause in the move ahead of another key spot of resistance on the charts, plotted around the 1850 level.
FOREXCOM:XAUUSD
by charliedavies770
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