{"id":63810,"date":"2023-05-30T16:02:58","date_gmt":"2023-05-30T13:02:58","guid":{"rendered":"https:\/\/ironfx-com-php8.wp-dev.int.theitops.net\/?p=63810"},"modified":"2024-07-10T16:54:20","modified_gmt":"2024-07-10T13:54:20","slug":"is-the-downward-pressure-maintainable","status":"publish","type":"post","link":"https:\/\/www.ironfx-cn.com\/ms\/is-the-downward-pressure-maintainable\/","title":{"rendered":"Is the downward pressure maintainable?"},"content":{"rendered":"

Gold continues its downward<\/a> motion while during today\u2019s European session reached characteristically a two-month low. On a basic level, it seems that the negative correlation of the USD with Gold\u2019s price still is the main factor behind the precious metal\u2019s price direction. In this report, we aim to shed light on the catalysts driving the precious metal\u2019s price, assess its future outlook and conclude with a technical analysis.<\/p>\n\n\n\n

White House reaches a deal for US debt ceiling<\/strong><\/h2>\n\n\n\n

On the fundamental side, we note that the main issue tantalizing the markets is the possibility of the US defaulting and whether the White House could reach an agreement with Congress about raising the US debt ceiling, thus averting a US default. US Treasury Secretary Yellen last Friday warned that the X-date is nearing, updating the possible default date to June 5th. Yet over the weekend US President Biden and Republican lawmakers intensified their efforts and reached a deal for the rise of the US debt ceiling. Hence the pressure is now transferred to Congress where the deal is to be voted into law. Yet the agreement seems to have created some backlash from more conservative US lawmakers, as well as former US President Trump and Florida Governor De Santis, both running for the Republican nomination of the 2024 US Presidential election. Should the US Congress be able to pass the deal into law, in time, we expect market nerves to calm while should the Congress fail to do so, considerable upheaval should be expected in the markets which in turn could create safe haven inflows for the precious metal.<\/p>\n\n\n\n

The Fed\u2019s intentions<\/strong><\/h2>\n\n\n\n

Last Friday the US Core PCE growth rate for April was released and tended to pass a bit under the radar. The release showed that inflationary pressures within the US economy remain persistent as the growth rates accelerated both on a year-on-year and month-on-month level. The release may force Fed policymakers to maintain an intense hawkish rhetoric, implying that more rate hikes are to come or at least that interest rates may have to remain at high levels for a prolonged period. Such a scenario would contradict the market\u2019s current expectations which include another 25 basis-points rate hike in the Fed\u2019s next meeting and rate cuts before the end of the current year. Should Fed policymakers decide to sharpen the hawkish rhetoric we may see the USD gaining some ground and given the USD\u2019s negative correlation with gold\u2019s price, such a scenario may amplify the selling pressure on Gold.<\/p>\n\n\n\n

US employment report the next big test<\/strong><\/h2>\n\n\n\n

Yet the next big test for gold\u2019s price is expected to be the release of the US employment report for May, due out this Friday. Expectations currently are for the NFP figure to drop from 253k to 195k and the unemployment rate to tick up to 3.5%. Should the actual rates and figures meet their respective forecasts and despite the unemployment rate implying a relative tightness of the US employment market as it remains at relatively low levels, the expected drop of the NFP signals the cracking of the tightness of the US employment market, something that may weaken the USD, while at the same time may cause Fed policymakers to hesitate. Should the release overall release, weaken the greenback we may see it providing some support for gold\u2019s price. On the other hand, we have to note that the uncertainty for the actual rates and figures is high and it would not be the first time that the actual data have disproven the prognosis. Hence we may see wide volatility also affecting gold\u2019s price and we would advise caution whilst trading near the time of the release.<\/p>\n\n\n\n

Technical Analysis – Gold<\/strong><\/h2>\n\n\n\n

XAUUSD H4 Chart<\/em><\/strong><\/h3>\n\n\n\n
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