Janet Yellen’s view on interest rates is common sense: if the economy is surging too quickly and raising the risk of inflation, it is likely the Fed would act by hiking rates. This should not be the main news, but in the current scenario it was enough to trigger a quick sell off on stocks and gold as well. Bullion, indeed, is inversely correlated with US rates and with the greenback with this relationship being clearly demonstrated once again in the last few hours. The gold price lost 1%, but remained above the key supports at $1,750 and $1,765, while the first resistance zone is still at $1,795-$1,800. Only a clear climb above $1,800 will open space for further recoveries with bullion still moving in the $1,750-$1,800 range, waiting for a fresh driver.
The bullish mood prevails in Europe on Wednesday amid higher market volatility, following yesterday’s strong sell-off on tech shares. Most European benchmarks edged higher, boosted by travel, miners and other energy shares as the old continent forms its plan to reopen its borders to vaccinated tourists, which is helping boost demand in those sectors. This appetite for energy stocks is also due to a sector rotation move from investors as they switch their exposure from growth to defensive shares following yesterday’s hawkish comments from US Secretary Treasury Janet Yellen. Moreover, her words highlighted lingering inflation concerns most investors now have, which pose a real threat to an extended stock rally and increase the risk of a deep correction to come. Technically speaking, the DAX-30 Index paints a worrying picture with the price having broken-out the consolidation zone and still trading well below 15,090pts. Today’s bullish move may be a correction before the market reaches new lows towards 14,800pts and 14,580pts, unless another strong bullish catalyst comes to reverse short-term market sentiment.
Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.