The price of gold maintained a good market position despite the volatility that attended the New York trading session as a result of safe-haven charges on the US dollar. American stocks narrowly closed with profits after a late rally during the day’s trade, creating an impressive turnaround. The averted broad risk and market volatility were possibly responsible for the bullion prices.
The American Treasury Effect
A large number of purchases in the US Treasury market was also helpful to gold by taking yields below the shorter end of the curve, while long-dated yields reduced losses as the stocks rebounded. The US Treasury rates increased sporadically since December 2021, supported by the Federal Reserve’s plans to increase interest rates.
The increased interest rate speculations may, however, have been pushed too hard. A two-year Treasury note worth $54 billion was auctioned, and it was met with very strong demands in the US on Monday. The event indicates that the speculators calling for almost four Federal Reserve interest rate increases in 2022 may have been overreaching. It all portends a good signal for gold as more demand for bonds will increase its price, as bond yields are inversely proportional to its price.
With the Federal Reserve set to announce its decision this week, precious metal traders are also set to have a very busy week. It is, however, expected that the Federal Reserve Chairman, Jerome Powell, will set back some of the hard market pricing on interest rates during the press conference following the Federal Open Market Committee meeting. The markets are presently pricing in almost 100 bps, which is possibly more than what the Federal Reserve can accommodate.
Later in the week, the Personal Consumption Expenditure (PCE) price index is expected to be released. Some financial analysts are expecting to see a 4.8% year-on-year in the major aspect of the price index for last December. Analysts also say it would be good for traders and observers to keep watch on the five-year note Treasury auction slated to take place tonight to help measure total demands for bonds. Yet another auction may take rates down once again on the shorter end of the curve. If this happens, it will boost the gold price further.
Technical Forecast for Gold
As far back as July 2021, the price of gold rose from a new level of support that was a resistance a number of times. The possible next bullish target is in November when a high of 1877.15 is expected. Although, gold prices may need some more consolidation before then.