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On April 15th, Ernst & Young economist Bansie Madavani stated that the conflict in the Middle East and the resulting rise in energy prices have brought a stagflation shock to the UK economy. She predicted that the UKs overall inflation rate would rise by more than 3.0% year-on-year in the coming months, while the economic growth rate is expected to be below 1.0%. She also pointed out that the prolonged energy price shock would increase the likelihood of a recession. Therefore, the Bank of England is unlikely to raise interest rates due to the direct impact of rising energy prices, and will instead adopt a wait-and-see approach.The yield on Japans 20-year government bonds fell 3.5 basis points to 3.235%.On April 15th, former US Treasury Secretary Janet Yellen stated that she still believes a US interest rate cut is possible later this year, although oil price volatility triggered by the Iran war has cast a shadow over the outlook. Yellen said, "This is actually a broad supply shock, spreading from gasoline prices to liquefied natural gas, fertilizers, food, shipping costs, and semiconductors." Yellen noted that while she doesnt rule out the possibility of raising interest rates, stable long-term inflation expectations suggest that this is unlikely at present. "I think my guess is that there might be an interest rate cut by the end of the year. I think thats entirely possible, and the most likely scenario. However, many things can happen."On April 15th, former US Treasury Secretary Janet Yellen stated that Trumps hardline approach in pressuring the Federal Reserve to lower interest rates to reduce US debt costs was nothing short of the rhetoric of a "banana republic." Speaking at the HSBC Global Investment Summit, Yellen warned about the independence of monetary policy, saying she had "never seen such a threat posed to the Federal Reserve. Would a president of a developed country frequently advocate setting interest rates to lower debt servicing costs?" she asked. "Thats common in banana republics," she said, adding that managing interest rates for government budgetary reasons has led to "hyperinflation" in some countries.Former U.S. Treasury Secretary Janet Yellen said that Federal Reserve Chair nominee Kevin Warsh lacks "credibility" in advocating for interest rate cuts.

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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