Gold Price Remains Pressured Below $1,980

Gold Price is looking to wipe out the previous gains, as it edges lower in the Asian trading this Tuesday. The unstoppable rally in the USD/JPY pair, fuelled by the Fed-BOJ policy imbalance, is bolstering the US dollar bid at gold price’ expense.

Gold Price Remains Pressured Below $1,980

Gold Price: The disparity between the US and Japanese monetary policy stance got accentuated after St. Louis Fed President James Bullard said that a 75-bps rate hike could be an option, if necessary. The downside in gold price, however, remains limited by the retreat in the US Treasury yields from three-year highs.

The covid lockdowns in China and the ongoing Russia-Ukraine war stoke inflation and growth risks, boding well for the safe-haven gold. Although the sentiment will be driven by the Fed’s expectations, in absence of the significant US economic data.

More hawkish gold price comments from Federal Reserve officials have reinforced expectations for faster US policy tightening. They started to flow in from New York Fed President John Williams who said last week that a half-point rate rise next month was “a very reasonable option,” in a further sign that even more cautious policymakers are on board with faster monetary tightening.

Meanwhile, Fed member James Bullard spoke on Monday and offered further insight on the outlook for Fed policy. Bullard is one of the bank’s most hawkish and has called for interest rates to reach 3.0% this year. US inflation is “far too high,” he said on Monday, repeating his case for increasing interest rates to 3.5% by the end of the year to rein in inflation expectations and slow what are now 40-year-high inflation readings.

“What we need to do right now is get expeditiously to neutral and then go from there,” Bullard said at a virtual event held by the Council on Foreign Relations, adding that he doesn’t expect to need to raise rates by more than half a percentage point at any meeting.

He said that the Unemployment Rate can continue to fall even with aggressive rate hikes, repeating his view that unemployment, now at 3.6%, will go below 3% this year. This all comes ahead of the Fed Chair Jerome Powell later this week, where he is expected to solidify expectations for a 50 bps rate hike at the coming Fed policy meeting.

As a consequence of such sentiment, the US rate futures market has priced in a 96% chance of a 50 basis-point tightening at next month’s Fed policy meeting, and about 215 basis points in cumulative rate increases in 2022, providing ample support for the dollar.

As for positioning, speculators’ net long bets on the US dollar fell for a second straight week, according to calculations by Reuters and US Commodity Futures Trading Commission data released on Friday. The value of the net long dollar position was $13.22 billion for the week ended April 12.

Meanwhile, gold price climbed to a five-week high dispute USD strength amid fears of more sanctions. ”Increasing likelihood of a European Union embargo on Russian gas could see inflation staying high, supporting gold demand as an inflation hedge,” analysts at ANZ Bank said. ”ETF flows continued to be strong, with total holdings rising to a 14-month high of 106.6 million ounces.”

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Gold Price Remains Pressured Below $1,980 via @marketinvestor
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