Gold – Fed Speakers and the NFP Report Will Affect Gold Prices, Says XAU – Stocks in View

Oct 6, 2022
VOT Research Desk

Key News – Insights and Analysis

Gold prices will move in tandem with market movements driven by FOMC rate rise expectations.

XAU/USD pauses at previously-held resistance and the 50-day SMA

On Wednesday, gold prices fell around 0.5 percent, ending a rally that had begun last week and pushed the yellow metal nearly 6 percent higher after it reached its lowest point since April 2020.Bulls benefited from a resurgence in market sentiment that saw traders move away from the safe haven of the US Dollar and into stocks. A further boost for the non-interest-bearing asset was provided by bond traders’ contribution to lowering yields.

On Wednesday, those trends became weaker. Despite a valiant intraday effort, US equity indexes ended the day with losses. The Nasdaq-100 Index lost 0.08 percent and the S&P 500 Index lost 0.2 percent at the close. Additionally, the selloff would have been much more pronounced if it weren’t for an increase in crude oil prices, which helped the energy industry. The energy sector of the S&P 500 GICS gained 2.08%.Eight of the eleven sectors on the index were negative.

For the time being, gold prices are correlated favorably with US equity indexes, which are largely influenced by bets on the Federal Reserve raising interest rates. All things considered, XAU brokers might need to follow the S&P 500, as I proposed a month ago. Outside of China, Asia-Pacific stocks are bucking the overnight bearish trend. As prices trade just above 1720, that is providing XAU with a slight boost.

It’s possible that equity markets are running out of steam. When asked in an interview with Bloomberg TV whether the Federal Reserve would alter its rate path, Mary Daly responded, “We are resolute at raising the interest rate into restrictive territory…”Ms. Daly’s comments serve as a stark warning to traders who appear ecstatic to jump on signs of easing. She is one of the more traditionally dovish members.

According to Fed funds futures, that isn’t stopping rate traders from pricing in a pivot, possibly as early as May. Even more generous are overnight index swaps, which price in a small possibility of a cut by March of next year. These bets could be significantly swayed by the US non-farm payrolls report on Friday, and Fed speakers Mester and Kashkari are scheduled to speak on Thursday. However, the next 48 hours may be volatile for markets, including gold prices.

The 50-day Simple Moving Average (SMA) and a support level that turned into resistance in April 2021 are causing prices to stall. Before prices threaten the September low, a pullback would aim for support around the 1680 level. A break higher, on the other hand, brings the August high of 1807 into focus. As it moves higher and closer to its center line, the MACD oscillator is exhibiting positive momentum.

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