Islam Saeed wrote Wednesday, July 19, 2023 01:17 PM Stabilized gold prices Today, it is close to its highest level in a month and a half, which was recorded yesterday, after US retail sales data showed a decline in consumer spending, which raised expectations that the US Federal Reserve is on its way to ending the cycle of raising interest rates.
Spot gold prices are trading today, Wednesday, at the time of writing Gold Billion’s technical report, at $1978 an ounce, after rising yesterday by 1.2%, gaining nearly $25, and recording the highest level in a month and a half at $1984 an ounce.
The rise in gold prices yesterday helped it breach the resistance area around the level of 1965 dollars an ounce, to reach the next resistance area at 1975-1980 dollars an ounce, to settle today’s trading below the level of 1980 dollars an ounce.
The main reason behind the significant rise in gold prices yesterday was the US retail sales data for the month of June, which showed an increase of 0.2% less than expectations and the previous reading at 0.5%, which indicates a decline in consumer spending and the beginning of the emergence of the negative impact of US interest rate hikes on Spending levels, according to Gold Billion.
The June jobs report as well as last week’s retail sales and inflation data greatly increased expectations in the markets that the Federal Reserve will resort to halting the rate hike cycle after its next meeting.
The markets see a probability exceeding 96% that the Federal Reserve will raise the interest rate by 25 basis points during its meeting next week, provided that it stops raising interest rates for a long period that may reach the beginning of the second quarter of next year before it starts cutting interest rates.
Gold markets moved according to this scenario, which is largely positive for gold, as it includes stopping interest rates, which is the biggest negative factor facing gold markets. On the other hand, we find that recent economic data shows a slowdown in spending and growth rates.
The recent growth data issued by the Chinese economy showed a decline in growth and now the United States is following it, in addition to a decline in the performance of the economic sectors in both the eurozone and Britain, which prepares the markets for an upcoming economic recession as a natural result of the continuous interest-raising operations by global central banks. to counter inflation.
Gold recovers greatly in times of economic recession, as it represents the first safe haven in the markets, especially since we have seen a decline in US government bond yields since the beginning of the week, which is the first competitor to gold.
The yield on 10-year bonds decreased since the beginning of the week by 2.2%, to its lowest level in 3 weeks at 3.729%, while the yield for two years, which is most affected by interest expectations, fell during this week by 1.1%, according to Gold Billion analysis.
US bond yields continued to decline during the last two weeks, in a clear reflection of the market’s change in expectations regarding the future of the Federal Bank’s monetary policy, which is positive news for the gold markets because the decline in demand for bonds increases the attractiveness of gold for investment, as it does not provide a return to its holders, but is a safe haven.
As for the performance of the US dollar, it returned to the rise during trading today, Wednesday, so that the dollar index, which measures its performance against a basket of 6 major currencies, rose today by 0.2%, and recorded the highest level at the psychological level of 100 points.
The recovery of the US dollar today, despite the weak retail sales data on the US economy, comes in light of the markets’ current search for the best safe-haven investments, after expectations of an economic recession increased, and the US dollar plays the role of a safe haven in these times, second only to gold, which is what It may limit gold’s gains because of the inverse relationship between them.
Everyone is now waiting for the next Federal Reserve meeting, as it will decide whether it will continue to raise interest rates after this meeting or will be satisfied with raising interest rates during this meeting for the last time, knowing that the Federal Bank has not yet confirmed the scenario of completing the monetary tightening cycle, which makes everyone looking forward to this. the meeting
2023-07-19 10:17:00
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