- Gold price sinks in Asia and the opening range for Friday is wide.
- Bears move in as US Dollar bulls move in to take on key territories.
- US fundamentals are kicking in and finally impacting prices.
The Gold price bears are moving in and are targeting the $1,825 level that has been screaming out since the start of the move in early February. At the time of writing, Gold price is trading at $1,826 as the US dollar surges with pent-up demand.
The US Dollar, as measured against a basket of currencies, has been breaking to the upside and out of a geometrical consolidation’s top side resistance albeit on the backside of the prior bullish trends supporting lines. Firmly hawkish Federal Reserve rhetoric and data have seen DXY close firmly above 103.65/80 on Thursday and Friday bulls are moving in for the kill.
The data on Thursday showed that the Producer Price Index (PPI) leapt by 0.7% in January, which was an abrupt reversal of December’s 0.2% dip and well above the 0.4% consensus. Year-over-year, the measure fell in at 6%, hotter than the 5.4% projection but a cool-down from the prior (upwardly revised) 6.5% print. The core PPI measure posted a monthly increase of 0.6%, triple the December rate, and an annual increase of 4.5% – a 20 basis point drop from the previous month.
This came on the heels of a blowout JanuaryNonfarm Payrollsreport, on Friday and on Thursday, the jobs market data again confirmed that the labour market is still carrying plenty of momentum. The Labor Department reported that jobless claims, for the fifth straight week, came in below the 200,000 level associated with a healthy employment churn.
Retail Sales jumped 3% in January as well, in data showing the prior day, blowing expectations out of the water despite an inflation increase that might have otherwise kept consumers’ hands in their pockets, highlighting the strength of the economy.
On Tuesday, the annual Consumer Price Index inflation rate in the US slowed slightly to 6.4% in January from 6.5% in December, the lowest since October 2021 but above market expectations of 6.2%. Last week’s Services PMI data for the prior month was impressively high also.
On Thursday, as a consequence, the whole yield curve rose, and markets have started to embrace a higher for longer sentiment as estimates are now rising that the Fed may continue to raise rates into the summer.
Analysts at Societe Generale explained that the current pricing looks for two or three 25bp hikes by September, ”and it may take a bigger inflation scare than we saw in this week’s CPI data, or another very strong labour market report at the start of March, to push them higher.”
”Absent that, we will probably get stuck in a range again, before the next move (which we’d guess is more likely to be towards dollar softness as growth resumes elsewhere),” the analysts said.
Gold & DXY technical analysis
DXY bulls are moving in and breaking new highs which are forcing the offer in Gold price:
The weekly chart shows the Gold price heading towards the $1,825 target area that has been called out for some weeks in various prior analyses:
Prioranalysis:Gold Price Forecast: XAU/USD bears remain keen on $1,825,
However, Asia could be building the base for a short squeeze to end the week to square the books.
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