FXTM information and reviews
FXTM
95%
OctaFX information and reviews
OctaFX
94%
XM information and reviews
XM
93%
FXCC information and reviews
FXCC
92%
Libertex information and reviews
Libertex
91%
FxPro information and reviews
FxPro
90%

Gold pressured by stronger dollar


7 September 2022

The precious metal continues to be under pressure, as the dollar relentlessly surges to new highs, on the back of an aggressive stance adopted by the Fed and other central banks, the prospect of elevated interest rates for prolonged periods of time, deepening energy crisis and widespread fears of economic slowdowns across the globe. In this report we aim to shed light on the catalysts driving the precious’ metal price, assess its future outlook and conclude with a technical analysis.

Energy crisis in the European continent deepens

Following the recent headlines that Gazprom is set to cut gas flows from the key Nord Stream 1 pipeline to Europe, as a retaliation tactic, after G7 members announced the price capping of oil, the European continent is found in dire straits once again. The shut down of Europe’s major supply route stoked fears of a recession in the region and painted a grimmer picture for the impending winter for European consumers, who are to be hurt particularly hard by soaring energy prices. Not only, the worsening energy crisis and the supply shocks could cause the European continent to fall into deeper recession problems, but also the persistent inflation could force the ECB’s hand to proceed with a jumbo rate hike, as it was explicitly expressed at the Jackson Hole conference last month.

Currently, the EUR OIS implies a 95% probability for a 75-basis points rate hike by the ECB for the September meeting which is set to take place on Thursday the 8th of September, indicating that the market sees the aggressive rate hike as a done deal. Both matters in the European continent could drive demand for gold higher as uncertainty on the one hand favors gold, yet we would like to note that ECB’s possibly outsized rate hike could take some of the shine from the greenback thus favoring gold’s price.

Fed’s envoys set to speak

We would also like to highlight the scheduled speeches of Cleveland Fed President Mester, Fed Vice Chair Brainard and Fed Vice Chair for Supervision Barr tomorrow Wednesday the 7th of September who are expected to provide valuable clues as to the Fed’s approach ahead of the highly anticipated September meeting. Moreover, Fed Chair Powell is set to make an appearance on Thursday the 8th of  September and his speech will be monitored by investors as the comments can could bear significance and may cause turmoil in the markets.  Following a fresh round of favorable employment data last week, indicating that the US labor force appears healthy and able to create new jobs, as well as having a relatively low and stable unemployment rate, analysts in particular await the Fed Chair Powell’s input.

Overall, the hawkish narrative is expected to be showcased once again, since the employment report results, point at a rather resilient labor market which in turn allows the Fed to solely focus on curbing inflationary pressures and attempt to prevent inflation becoming deeply entrenched within the economy. As a result, we may see the dollar remain elevated at its 20-year highs and gold to continue its underperformance due to their negative correlation.

XAUUSD H4 Chart

XAUUSD H4 Chart

Looking at XAUUSD 4H chart we observe the descending trendline initiated on the 15th of August, highlighting the downward trajectory of the bullion’s price. We hold a bearish outlook bias for the precious metal’s price action as indicated by the descending trendline. The RSI indicator below our 4-hour chart, currently points to a reading of 48, implying some indecisiveness on behalf of the market, surrounding the precious following the failed attempt to break above the 1727 (R1) resistance level. Furthermore, worth pointing out is the death cross formed on the 17th of August, where the 100-period moving average crossed below the 200 period moving average, reflecting gold’s current price weakness. Should the bulls take over and for us to change our assessment, we would require seeing the break above the descending trendline, the break of the 1727 (R1) resistance line and the definitive move near the 1750 (R2) resistance level.

Should the bears continue to reign over, we may see gold’s price break below the 1695 (S1) support line and a move near the 1678 (S2) support base, a level once seen before on the August of 2021.

#source

Share:


Related

Forex and Cryptocurrencies Forecast for September 26-30, 2022
Forex and Cryptocurrencies Forecast for September 26-30, 2022

Last week, all the attention of the markets was focused on the FOMC meeting of the US Federal Reserve, which took place on September 21. The probability of another rate hike by 75 basis points (bp)...

26 Sep 2022

Trading the SPDR S&P 500 ETF Trust
Trading the SPDR S&P 500 ETF Trust

The Standard & Poor’s (S&P) 500 Index measures the market capitalisation of the top 500 US largest corporations. Many traders and investors use the S&P 500 Index as a benchmark...

23 Sep 2022

Gold pauses as traders await Fed decision
Gold pauses as traders await Fed decision

The anticlimactic performance of gold continues as the prospect of aggressive rate hikes by central banks around the world amid heightened inflationary pressures...

21 Sep 2022

Developing a forex trading plan: All you need to know
Developing a forex trading plan: All you need to know

All forex traders have different backgrounds, market views, risk appetite, thought processes and expectations. Therefore, traders should not just blindly follow what other traders do...

20 Sep 2022

NordFX: Forex and Cryptocurrencies Forecast for September 19-23, 2022
NordFX: Forex and Cryptocurrencies Forecast for September 19-23, 2022

The World Bank said last week that risks of a recession in 2023 are growing amid simultaneous tightening of monetary policy by the world's leading Central banks and the energy crisis in Europe...

19 Sep 2022

Gold gains traction on the back of weaker dollar
Gold gains traction on the back of weaker dollar

The precious’ recent rally from its near year-to-date lows could be attributed to the broader dollar weakness observed in the past week, even though it remains elevated near its 20-year highs...

14 Sep 2022


Editors' Picks

HFM information and reviews
HFM
89%
IronFX information and reviews
IronFX
88%
FXCM information and reviews
FXCM
87%
NordFX information and reviews
NordFX
85%
Vantage information and reviews
Vantage
84%
FP Markets information and reviews
FP Markets
81%

© 2006-2022 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.