Books: Mahmoud Haha _ Economy Gate
Gold prices globally witnessed a positive trading week that prompted them to record the first rise on a weekly level since mid-January, to take advantage of the decline in dollar levels and the calmness of the markets regarding interest rate expectations by the Federal Reserve, according to the technical report of Gold Billion, and the prices of an ounce of gold rose globally during Last week, by 2.5%, to record the first weekly increase in five trading weeks, to close gold trading at the level of $1856.21 an ounce.
Despite the significant decline that gold suffered during the month of February, it showed the ability to hold above the important psychological level at $1,800 an ounce, and it rushed to the current resistance at $1,850 an ounce, which creates optimism in the gold markets, especially since all this comes at a time when bonds are trading. US government at record levels.
The other factor in the rise of gold during the past week was the lackluster performance of the US dollar in the financial markets. The dollar index, which measures its performance against a basket of 6 major currencies, fell by 0.6% during the past week, recording its first weekly losses after 5 weeks of gains.
The decline in dollar levels makes gold more attractive to other currency holders, which helped gold levels rise during the past week after reaching suitable buying areas at $1,800 an ounce.
The dollar’s decline came after statements by Fed member Rafael Bostick, head of the Federal Bank of Atlanta, in which he indicated that the bank prefers slow and steady movement in its monetary policy during this period, indicating that raising interest by 25 points during its next meeting in March is the appropriate path now.
The statements calmed the expectations regarding the monetary policy of the US Federal Reserve, especially after the strong economic data that was recently issued by the US economy and the stability of inflation at high levels, which contributed to the emergence of expectations of the possibility of raising the interest rate by 50 basis points at the Bank’s meeting in March.
Bostick’s statements limited these expectations to bring the markets back to reality, which is the continuation of the gradual increase at the lowest rate of 25 points during the next three meetings of the Bank, so that the market’s expectations of the interest rate reaching 5.4% until September will remain in control of the markets, and it has already been priced.
The battle for gold and US government bonds
US government bonds dominated the attention of investors since the beginning of the year after the yield on them rose to record levels due to the continuous interest rate hike by the Federal Reserve, which forces investments to leave gold, which does not provide a return in favor of bonds with increasing returns during this period.
Despite gold’s recovery during the past week, US bonds still have the upper hand, as we can see in the following chart, which shows the relationship between the yield on US government bonds for 10 years and 3 months and the price of gold.
It is noteworthy that the yield on US government bonds for 10 years recorded last week the highest level in 4 months at 4.089%, before it retreated and closed at the level of 3.958%, while the yield on bonds for 3 months recorded the highest level in 7 weeks at 4.908%.
The expected positive performance in the short term for gold faces a new obstacle, which is the high inflation rates. As shown in the following chart, we find that the US inflation index represented a level of resistance against gold prices, even with the strong rise of gold at the beginning of this year.
Last week, gold accumulated positive momentum that may help it during the coming period to test inflation resistance during the coming period.
New support for gold prices from the World Gold Council
A report was issued by the World Gold Council stating that global central banks are continuing to purchase gold and increase their reserves during the month of January. Central banks bought 31 tons of gold, a monthly increase of 16%. The purchases were made by three central banks, namely China, Turkey and Kazakhstan. This comes after China greatly intensified its purchases of gold at the end of last year, while Turkey was the first in the largest official buyer of gold in 2022.
The World Gold Council expects that purchases by central banks will continue to increase in 2023, especially after the record levels they recorded over the past year.
The demand by central banks to buy gold doubled in 2022, reaching 1136 tons, after it was worth 450 tons in 2021, setting a record for banks buying gold 55 years ago.
The fourth quarter of 2022 alone witnessed purchases from central banks amounting to 417 tons, bringing the total for the second half of 2022 to more than 800 tons.
Gold is looking for a new direction from the events of the coming week
After ending last week’s round in favor of gold, precious metal traders are looking for a new direction, supported by the important events awaiting global markets during the new trading week.
Markets will focus on Federal Reserve Chairman Jerome Powell’s testimony on the US central bank’s semi-annual monetary policy report before the Senate Banking Committee on Tuesday. This will be followed by his testimony on the same topics before the House Financial Services Committee on Wednesday.
After that, the focus will be on the government jobs report data that will be issued next Friday for the United States of America, with expectations that the US unemployment rate will stabilize at 3.4% and new jobs will be hired in February by 206 thousand jobs, less than the strong January reading of 517 thousand jobs.
Until gold finds a new direction from these important events, we expect gold to continue trading in the range of 1820-1850 dollars an ounce.
local gold prices
Last week witnessed the return of gold to rise again after a series of declines that affected it throughout the month of February, to find support from the recovery of the price of an ounce globally, in addition to the return of tensions to the Egyptian market again, so that gold returns to play the role of a safe haven again.
Gold prices rose today, Saturday, to record the price of the most common 21 carat gram, 1830 pounds per gram, with an increase of 50 pounds per gram, an increase of 2.8% compared to yesterday’s price.
During the past week, gold prices increased by 150 pounds per gram, recording an increase of 8.9% for 21 karat.
As for the exchange rate of the pound, it has moved again after the stability it witnessed during the past two weeks. Today, Saturday, the exchange rate of the pound against the dollar recorded 30.77 pounds per dollar.
Gold prices found great support during the past week, whether from the decline in the exchange rate of the pound again or from the rise in the price of an ounce of gold globally, which prompted purchases again to take advantage of the previous period of decline, which reached gold prices to good areas for buying around 1680 pounds per gram.
On the other hand, crises and tensions have returned to the Egyptian markets again, beginning with the delay in pumping Gulf investments into the Egyptian market, or raising the prices of petroleum products for the first time in 2023, which increases the ferocity of inflation, which exceeded 30% levels.
Fear of the unknown and the continuous rise in price levels prompted individuals and institutions to buy gold again as a hedge against inflation and to take advantage of the decline in the price during the last period.
