Daily market commentary: Gold prices remain under pressure

Forex

The dollar is holding on to the gains of the last few sessions as Tuesday’s trading gets underway, with the index that measures its performance versus a basket of other major currencies remaining close to the multi-year maximum reached at the end of April. Despite a surprise slowdown in growth in the US – revealed by disappointing GDP figures published last Thursday – the markets continue to price-in an hawkish outcome for the FOMC meeting starting today. It is widely expected the Fed will deliver a 50 basis points interest rate hike, with an outside chance of an even more aggressive move, that could reach as high as 75 basis points, as the US central bank battles to bring inflation under control.

Ricardo Evangelista – Senior Analyst, ActivTrades

Daily Market Commentary

Gold

Gold prices remain under pressure during early Tuesday trading, close to the multi-week minimums reached during the previous session. Despite the precious metal’s role as a hedge against inflation and haven during times of geopolitical instability – two factors that remain very much in the picture – gold prices remain subdued as the dollar strengthens and yields continue to rise. The greenback is in demand and the 10-year treasury note yield reached 3% for the first time in more than three years, as the markets stay focused on the expected hawkish decision at the end of the FOMC’s meeting which will come tomorrow, anticipating a 50 basis points interest rate hike. In such a scenario, there may be further down-side for the non-yielding gold.

Ricardo Evangelista – Senior Analyst, ActivTrades

European Shares

European markets edged higher on Tuesday, alongside US shares, as investors are already welcoming the prospect of new monetary measures from Central Banks to combat inflation. Bull traders are buying the recent dips on stocks this morning after most markets fell back to their weekly low, with many betting on the anticipation of tightening monetary conditions to mitigate rising prices. It is likely that most investors have already priced-in tomorrow’s FOMC meeting where a record half-point rate hike is widely expected. However, even if the FED and other Central Banks manage to reassure investors temporarily, this would likely be short-lived as major macro challenges remains for the global economic recovery. First, even if the main target remains inflation, many wonder how the overall economy will respond to the end of the “infinite liquidity party”. Moreover, covid lockdowns in China, as well as lingering military conflicts in Ukraine are also among major bearish leverages and cautious signs for the market. Investors will of course pay solid attention to tomorrow’s FOMC rate decision, but meanwhile, today’s speech from ECB President Lagarde and US Job Opening figures for March may increase market volatility in the afternoon.

Pierre Veyret– Technical analyst, ActivTrades


Disclaimer: opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.

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