Market analyst Ross J Burland states that while the US dollar continues to rise, gold remains under pressure. Meanwhile, DXY was a few pints away from the 97 figure on Wednesday as hawks circled above the Fed. After a five-day drop to three-week lows, the gold price took offers to refresh the intraday high around $1,791 during Thursday’s Asian session. In doing so, the yellow metal is relying on lackluster market conditions to heal its wounds due to the lack of key data/events, as well as the Thanksgiving holiday in the US.
“Covid and inflation-related risk catalysts can drive gold price movements”
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As we reported , the indecision of gold traders is added to the mixed data from the US and Fed rate hike concerns, the stronger US Dollar Index (DXY) and the decline in Treasury rates. In addition, the analyst states that the Covid problems from the Euro Zone and the moderate stock futures act as an extra filter for gold trade. According to the analyst, risk catalysts related to the coronavirus and inflation could drive short-term gold price movements, possibly in a quiet day.
Meanwhile, the dollar posted a 16-month high against the euro and DXY marked the region just below the 97 figure. The analyst says investors are pricing in the expectation of a Federal Reserve rate hike in mid-2022 and a faster tapering that will potentially begin to adjust at the December meeting. In contrast, the European Central Bank is more concerned about Covid and growth and remains in the pigeon camp.
Fed officials are speaking more and more hawkish
Fed officials have been more hawkish lately due to stubbornly rising inflation, and San Francisco Fed President Mary Daly changed her stance. Mary Daly made the following assessment in an interview with Yahoo Finance on Wednesday:
If the improvements continue in the same way then I would fully support an accelerated tapering.
Mary Daly is now advocating for a faster tapering pace, echoing the rhetoric of Fed Vice Chair Richard Clarida. The vice president said last week that the December 14-15 meeting would be an appropriate time to have such a discussion. In particular, the Fed minutes underline the hawkishness in the Fed. Respondents assess that it may take longer for prices to loosen, and some say that faster tapering may be warranted.
“Gold price continues to melt after Fed Chairman’s re-nomination”
In addition, the euro, the only currency that exerts pressure on the precious metal other than the US dollar, is under pressure due to the newly announced covid data in Germany. Reports show that more than 70,000 new coronavirus cases have been reached, with some areas still reporting the largest daily increase by far.
This, combined with economic pressures on the day that showed German business morale worsening for the fifth month in November, will put pressure on the euro, the analyst says. According to the analyst, this development can support the strength of the US dollar and increase DXY above 97. Meanwhile, TD Securities analysts consider gold to be vulnerable to a deeper consolidation and make the following assessment:
Gold price continues to melt after Fed Chairman’s re-nomination. However, market pricing for Fed hikes could ultimately be very hawkish, given TD Securities’ forecasts for slowing growth and inflation next year.
Gold price technical analysis: Gold bulls seek a meaningful correction
According to market analyst Ross J Burland, from an everyday perspective, gold doesn’t matter. The analyst states that the price has stalled but has not yet reached the support level as shown in the chart. However, the analyst reminds that given the current rejection from the lows of the day, there are expectations of consolidation, which could lead to a move higher. The analyst points out the following technical levels:
Golden bulls will be looking for a meaningful correction, which brings the 38.2% Fibonacci retracement closer to $1,810. This aligns with former peaks for October.
