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On April 27th, Barclays analysts stated in a report that with inflation remaining high, the Federal Reserve is expected to keep the target range for the federal funds rate unchanged at its meeting this week, but a rate cut is still possible this year. The analysts said, "In a highly uncertain environment, the Fed tends to remain on hold. Strong demand and still relatively high inflation support its patience, and policymakers have also signaled a diminishing confidence in further rate cuts in the near term." The analysts indicated that if inflation falls as expected, the Fed is expected to gain sufficient confidence to begin easing policy around September. "We still expect it to cut rates this year." According to LSEG data, the money market currently prices in a 10 basis point rate cut by the Fed in 2026.The Philippine Department of Energy announced that the United States has approved an extension of the exemption period for the Philippines to purchase Russian oil and petroleum products.Toyota Motor Corp. reported a sales decline in March as demand for its best-selling RAV4 model weakened ahead of a facelift, while the conflict in Iran threatened to cut off key supplies, forcing the manufacturer to potentially reduce production. The company said Monday that global sales (including those of its subsidiaries Daihatsu and Hino) fell 5.8% year-on-year to 983,126 vehicles in March, while global production rose 3.9% to 1.02 million vehicles. These figures suggest that the worlds largest automaker is managing to stay afloat despite rising prices for raw materials such as aluminum and the base cost of auto parts due to the turmoil in the Middle East. Suppliers are preparing for shortages that could last for months, even if the Strait of Hormuz reopens and shipping returns to normal. Refineries need time to resume operations, and shipping companies need to digest the congestion caused by hundreds of ships stranded in the Persian Gulf. Major supplier Denso Corp. said in March that the ongoing conflict had reduced Japans monthly auto production by approximately 20,000 vehicles.Japans leading economic indicators for February came in at 1.3% month-on-month, compared with 0.3% previously.Japans leading indicator final reading for February was 113.3, compared to 112.4 in the previous month.

June Gold Buyers May Face Difficulties at $1987.60

Larissa Barlow

Apr 14, 2022 10:14

The market's strength is being fueled by demand for a hedge against rising inflation during the Russia-Ukraine conflict, lessening pressure from expectations of an aggressive US interest rate hike, and the US Dollar's intraday reversal top.

 

June Comex gold futures are currently trading at $1982.70, up $6.60 or 0.33 percent from their previous close. The SPDR Gold Shares ETF (GLD) is currently trading at $184.66, up $0.89 or 0.48 percent from its previous close.

 

Gold is regarded as an inflation hedge and a hedge against geopolitical concerns. However, higher interest rates in the United States would increase the opportunity cost of storing non-yielding bullion and strengthen the dollar against which it is valued.

 

However, the price action shows that gold buyers are seeking insurance against inflation and are not very concerned about opportunity costs at the moment. Despite all of the Fed's hawkish rhetoric and anticipation for aggressive rate hikes, we have yet to witness a shift in the direction of inflation.

 

Gold is likely to remain underpinned for the foreseeable future as long as the inflation arrow continues to point upward and the Ukraine war continues.

 

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Technical Analysis of the Daily Swing Chart

According to the daily swing chart, the primary trend is upward. A move over the intraday high of $1985.50 reaffirms the uptrend. A break of $1916.20 will revert the major trend to the downside.

 

On the upside, the retracement zone between $1987.60 and $2009.90 is the nearest objective.

 

On the downside, the long-term Fibonacci level at $1958.70 serves as the initial support, followed by the short-term 50% level at $1932.90.

Technical Forecast for the Daily Swing Chart

The June Comex gold futures market's path through Wednesday's close is likely to be dictated by trader reaction to the 50% level at $1987.60.

Scenario of Bullishness

A sustained move above $1987.60 will signal that buyers are present. This could provide the necessary momentum for a test of the Fibonacci level at $2009.90. This is a trigger point for an upside acceleration.

Scenario of the Bear

A persistent decline below $1987.60 indicates the existence of sellers. They intend to attempt the formation of a secondary lower top. This, if successful, might result in a break into $1958.70.

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