Market Analytics and Considerations
Key Points
Price of gold Foundational Projections: NEUTRAL
In the coming week, the FOMC gathering and inflation data will be the primary drivers for gold.
Markets have already factored in a 74.7% chance of a 50 bps Fed raise.
Price Movement and a Possible Golden Cross Indicate More Gain.
The precious metal has spent the remainder of the week attempting to rebound from Monday’s sharp slide, which was aided by good news out of China and a falling dollar. This week, as the yellow metal battled to gain acceptance above the crucial level, the $1800 handle seemed to serve as somewhat of a roadblock.
The dollar has mostly suffered, which may be cyclical since the dollar has historically performed poorly in December. However, US statistics keep showing how strong the US economy is as Friday’s PPI report exceeded expectations. The good Covid news from China and the weaker dollar helped gold recover from recent losses to trade reasonably flat as the weekend draws near.
DATA ON US INFLATION AND THE FOMC MEETING
Considering the most recent edition of US statistics, there is a greater likelihood that the peak Fed funds rate will rise. Since the meeting in September, Fed members have reaffirmed their conviction that, despite small rate increases, we will likely wind up with a greater peak price than anticipated.
However, the markets appear to have accepted that the FOMC meeting would result in a 50bps raise with a possible aggressive tone. Markets are currently estimating a 50bps hike next week with a 74.7% chance. The PPI reading from Friday suggests that the November reading, which will be revealed on Tuesday, may be higher than expected. The interest rate decision on Wednesday could undoubtedly become even more intriguing if inflation rose after falling in October. The dollar has labored and US Treasury yields have fallen as a result of the market response to October’s inflation statistics, which is not encouraging for the Fed’s efforts to battle inflation.
Regardless of next week’s inflation reading, we believe we will most likely hear an aggressive FED announcement, which might support the US currency after recent weakness and prevent gold from rising beyond the $1800 level.
Source: CME FedWatch Tool
ECONOMIC CALENDAR FOR THE COMING WEEK IN THE US
The US economic schedule is expected to have a hectic week due to a number of Central Bank sessions which will take place the week after next. Four “highly” ranked data disclosures are scheduled for this week, in addition to numerous “medium” rated ones.
Here are the three top events on the economic docket for the upcoming week:
o We will have data on the CPI on Tuesday, December 13 at 13:30 GMT.
o The FOMC interest rate decision and economic forecasts are scheduled at 19:00 GMT on Wednesday, December 14.
o Additionally, the Fed will organize a press conference on December 14 at 19:30 GMT.
o The retail sales figures are due at 13:30 GMT on December 15th.
Technically, Gold has fought to maintain its wedge structure while rising over the 200-day MA. Gold will produce a doji candlestick closure if the weekly candle finishes beneath $1800, which seems appropriate considering the flurry of data coming out in the coming week. The present price movement suggests a new leg to the upside, and the probable golden cross formation supports the possibility of further gains. Considering the data the subsequent week, there is still a risk that the wedge formation may collapse to the south, bringing support at $1730 and possibly the 50 and 100-day MA into consideration.
Possible outcomes for gold depend on the FOMC decision made by next; a 50bps raise is likely to not result in significant dollar strength because most of it may already have been factored in. Nevertheless, must a 50 bps increase be coupled by a hawkish message and a higher Fed funds top level, gold may be further distanced from its three- tops around in the $1800 mark due to a comeback in the US dollar.
