Gold Stick to $2,000 As Uncertainty Prevails

Gold almost reached $2,000 last week as the USD turned bearish on weaker data, but reversed on Friday to end the week around $2,000

Skerdian Meta•Saturday, April 15, 2023•2 min read

Gold was showing extreme resilience last week after some softer economic data from the USD, showing that inflation is slowing at a decent pace, while the jobs market is softening. XAU/USD Pushed up reaching new highs for this year of almost $2050,

But, after the negative retail sales report, showing that sales fell for a second month in March in the US, Gold prices experienced a reversal on Friday, falling below $2,000. This reversal was triggered by a rebound in the DXY index, after it hit new lows for 2023 in the 100.80/75 range earlier. The moderated bounce in US yields also contributed to the decline.

Markets are currently pricing in a 25 bps rate hike by the FED at their May 3 meeting, with an 80% probability according to CME Group’s FedWatch Tool, up from 40% a month ago. If Gold had pushed above the recent peak of $2048, it could potentially move towards the 2022 high of $2070, which is just below the all-time top of $2075 which was put in place in August 2020. However, if bears manage to break the minor support at the weekly low of $1981, it could trigger a deeper retracement towards the April low of $1949, followed by another low at $1934.

Although one major factor for the bullish reversal in the USD and the decline in Gold was the speech from FED’s Waller, who continued to press for higher rates. It is not surprising to hear a hawkish stance from Waller, but what is striking is how explicit he is in his views, particularly with regard to the possibility of more than one rate hike.

Comments from Waller

Recent data show FED hasn’t made much progress on inflation, more hikes needed
Rates need to rise further
Extent of further increases depends on data
Still uncertain how SVB failure and bank stress will impact broader credit conditions
Mon pol will need to remain tight for ‘substantial’ period and longer than markets anticipate
Q1 data continue to surprise with stronger growth
Significant credit tightening could offset the need for rate hikes, but judgement difficult in real time
Developments so far validate decision to hike at the last meeting
Liquidity steps on SVB appear to have worked
Job demand has been declining via falling job creation rather than layoffs

Gold XAU Live Chart

GOLD

Check out our free forex signals
Follow the top economic events on FX Leaders economic calendar
Trade better, discover more Forex Trading Strategies
Open a FREE Trading Account

ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.