The gold price closed last week to a minus nodollar after a disappointing US nonfarm payroll (NFP) report failed to stimulate safe-haven inflows to the metal. The US dollar index (DXY) fell almost 0.5%, but that didn’t bring much relief to falling bullion prices. Despite weaker-than-expected NFP pressure, markets continue to fudge the increasingly aggressive Federal Reserve rate hike path. We have compiled market commentary and technical analysis by Thomas Westwater and Christopher Lewis for the readers of Cryptokoin.com .
Thomas Westwater: This would be a bad sign for the yellow gold price
Treasury bonds continued to rise through the weekend. The yield on the 10-year bond rose to its highest level since January 2020 as traders dumped government bonds to prepare for higher rates. The sustained rise in prices across the country is the driving force behind rate hike claims, and some Fed officials are now calling for three rate hikes this year. Given the interest-free nature of the asset, gold is expected to underperform in rising interest rate environments.
However, according to analyst Thomas Westwater, the yellow metal may struggle to move higher in the near term. However, this week we will see the report that the US will update its inflation data for December. Analisdollarser expects the core consumer price index (CPI) to rise 5.4% year-on-year, according to a Bloomberg survey. This means that it will be higher than the 4.9% data in November. The core CPI excludes volatile energy and food prices, which is a measure Fed officials prefer when assessing policy actions. The analyst makes the following assessment:
A warmer-than-expected CPI data may provide a high chance for a rate hike in March. This would also be a bad sign for yellow gold fiadollars.
Ahead of Wednesday’s inflation data, several Fed speakers are due and Chairman Jerome Powell is scheduled to testify before the Senate Banking Committee. It looks like it will be an action packed week for yellow metal.
“Position size should be kept relatively small in a volatile market”
Gold markets fell during the week to $1,780. All things being equal, the market will likely continue to see a lot of noisy behavior and of course sideways behavior, according to analyst Christopher Lewis, who said: “But it started stabilizing on Friday, which of course is a good sign.” As a result, the analyst states that this market, which he thinks will continue to be very noisy and volatile, will probably not be of interest to many long-term traders right now at the end of the day. According to the analyst, the 50-week EMA is sliced right in the middle of all this, so it definitely makes sense for the markets to continue to move sideways overall. Christopher Lewis interprets gold’s movement this way:
All else being equal, this is a market that seems to bounce between $1,760 at the bottom and $1,830 at the top. If we can break out of this range, we could make a slightly bigger move that long-term investors will watch out for.
However, with rising interest rates in America, gold is not helping, and of course there are many concerns that may be related to inflation in general. “In other words, this is a very noisy and volatile market,” the analyst advises, explaining why:
Therefore, you need to keep your position size relatively small. Frankly, I think long-term traders will ignore this market, but shorter-term range-bound traders will probably love it. Ultimately, this is a market that will eventually make a bigger move but as you can see, we’ve been on the range for over a year now.