Daily Brief, March 08 – Everything You Need to Know about Gold on Monday!
Arslan Butt • 3 min read
The precious metal GOLD prices continued to fall and posted a three-week losing streak as it struggled to recover from a spike in the U.S. bond yields and the U.S. dollar. Gold prices fell below $1,700 level to their lowest since April 2020.The Philadelphia Fed President Patrick Harker said that the U.S. central bank would not raise interest rates until 2023 as there was much uncertainty in the economy. He said that first, there was a need to get out of the pandemic, and then the condition of the economy could be decided. He also added that he did not see any sign of inflation getting out of control when asked about the recent fears of a spike in inflation after the release of more coronavirus relief measures.
Meanwhile, on Thursday, the Federal Reserve Chairman Jerome Powell said that he expected some inflationary pressure in the coming months, but it would not be enough to spur the Federal Reserve to increase interest rates. Gold fell on Friday after treasury yields and the greenback rose to another high level amid Fed chair Jerome Powell’s comments. He said that the bank would not decrease the bond-buying to tame fears of a sudden rise in inflation.
Apart from the U.S. dollar strength driven from inflation fears, gold prices also suffered because of the stronger-than-expected macroeconomic data release from the U.S. At 18:30 GMT, Average Hourly Earnings for February remained flat against the expectations of a reading of 0.2%. In February, the Non-Farm Employment Change raised to 379K against the expected 197K and supported the U.S. dollar, adding pressure on gold prices. The Unemployment Rate from the U.S. also dropped to 6.2% against the expected 6.3% and kept the U.S. dollar supported and added further losses in yellow metal prices. The Trade Balance remained flat with the expectations of -68.2B.
According to a report from the Federal Reserve, the US economy recovered continuously at a modest pace over the first weeks of this year. Businesses were optimistic about the coming months, and the housing demand was also increasing. The Federal Reserve said that the labor market remained ten million jobs short of the pre-pandemic levels. However, economic activity mostly expanded from January to mid-February. This added further strength to the U.S. dollar and added further losses in yellow metal prices.Moreover, the risk sentiment is likely to deteriorate during next week as the relations between China and the U.S. come under focus, after Chinese foreign minister Wang Yi warned the U.S. administration led by President Joe Biden that the Taiwan issue was a red line. He said that China has no room for compromise or concessions on the issue of Taiwan. He also urged the U.S. administration to fully understand the high sensitivity of the matter and completely change the previous administration’s dangerous practices of crossing the red line and playing with fire.
China still claims Taiwan as its territory despite the splitting of this island’s democracy in 1949 from mainland China. The reaction of the U.S. government to these harsh comments from China is still pending and will decide the future of the two largest economies ‘ relations and the future sentiment of the market.
Pivot Point: 1703.30GOLD is trading with a bullish bias at 1,708, and is likely to face resistance at 1,714 along with a support level of 1,703. On the higher side, a bullish breakout of 1,714 can lead the price towards the next resistance area of 1,722. On the hourly timeframe, gold has formed a descending triangle pattern that provides resistance at 1,714 along with a support level of 1,703. The series of EMA is expected to extend support at the 1,703 mark. Let’s keep an eye on the 1,703 level today as gold can stay bullish above and bearish below the same level. Good luck!
About the author
Arslan Butt is our Lead Commodities and Indices Analyst. Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D. Before joining FX Leaders Arslan served as a senior analyst in a major brokerage firm. Arslan is also an experienced instructor and public speaker.