Some Turbulence Expected Soon - RSBL

 The week opened on a slightly negative band for gold, as prices fell on Monday, sticking to a tight trading range seen over the past three weeks as markets turned cautious ahead of upcoming U.S. consumer inflation data and a Federal Reserve meeting.

Last week gold was supported by soft labour data. This pushed gold prices a bit over expectations that the Fed will skip a gold rate hike at the conclusion of a two-day meeting on Wednesday.

There is a lot of geopolitical and economic uncertainty occurring globally. 

The ongoing Ukraine crisis, Fed's economic uncertainty and financial crisis has led to a lot of volatility in the market. It has pushed gold into a tight trading range. 

Gold prices have stuck to a trading range of between $1,930 and $2,000 an ounce over the past three weeks, with uncertainty over the economy and monetary policy offering little cues for a breakout.

Gold stands to benefit from any potential pause by the Fed, and is expected to see increased safe haven demand as global economic conditions worsen this year. But given that U.S. interest rates are likely to remain higher for longer, upside in the yellow metal may be limited as returns on debt appear more attractive.

Rising interest rates had battered gold prices through 2022, as the Fed enacted its most aggressive pace of monetary tightening since the 2008 financial crisis. But the prospect of a pause in 2023 has kept gold upbeat so far this year.

While we will not argue against an upside follow-through in gold and silver prices,we still think the markets lack solid and sustainable bullish fundamental themes.

While we see the PGM markets continuing to slide, we see gold weakening but remaining capable of respecting consolidation support at $1,950. Silver on the other hand has a very strong chart set up and could be separating from financial market related fundamentals and in turn may be shifting toward factoring tight supply and hope for tech related demand improvement. However, both gold and silver should expect turbulence in the coming 3 sessions with global inflation readings and a US Fed rate decision scheduled for Wednesday afternoon. Uptrend channel support in July silver is far below the trade today down at $23.91 with closer in pivot point support seen at $24.32. As indicated already we see August gold remaining within a $1950 and $2000 trading range, but chart support is likely to be enhanced by weakness in the dollar.

Sentiment in the gold market remains bullish as momentum supports higher prices but analysts are warning investors that they should not expect prices to break above $2,000 an ounce next week as the Federal Reserve looks to maintain its hawkish monetary policy stance even as it leaves rates unchanged.

However, signs of a softening US jobs market should provide for ongoing declines in the dollar and ongoing declines in US treasury yields which are probably capable of pushing gold back up into consolidation resistance at $2001. 

Markets Await Cues From Fed Minutes

Volatility in the markets across all asset classes remained low as the 21st Feb was US President's Day Holiday. According to the Bullion Dealer in India, “Last week was pan ultimate week of volatility where the US Dollar and US Bond yields surged abnormally over fresh hawkish US-based Data, which further implied till June 2023. This data soared the mood of the US equities and precious metals to some extent even though both have shown the ability to digest the data and comments for Fed and also their future limitations to implement more.” During the weekend some geopolitical tensions mounted as the US ambassador warned China to cross redline if they directly support the military aid to Russia for its invasion of Ukraine. Hence the word of caution prevails across the Asian markets, which majorly opened flat. With a low profile day for precious metals, the only positive sentiment is the renewed geopolitical tension, especially between US and China. Gold prices hit their highest since April 2022 early this month, but have since lost about $120 after a slew of economic data showed signs of a resilient U.S. economy and a tight labour market, fuelling concerns that interest rates would stay higher for longer. “The price of the yellow metal has struggled in conjunction with the broader financial markets due to fears that the US central bank will continue to press the trigger to raise interest rates in its battle to beat inflation.” Shared the Gold dealers in Mumbai. Gold prices hovered around a six-week low on Monday, moving little as traders awaited more cues on U.S. monetary policy. Stubborn inflation, coupled with signs of strength in the jobs market, gives the Fed enough impetus to keep raising interest rates. The minutes of the Fed’s February meeting, due on Wednesday, is likely to reiterate the central bank’s hawkish stance. The main factor for metallic commodities - and global financial markets - is the policy of the US Federal Reserve. While there was some hope that the US central bank might soon hit the pause button on its quantitative easing efforts, the recent wave of inflation data has cast doubt on the inflation-lowering narrative. According to the Gold dealers in India, “Gold marked three straight weeks of losses, falling sharply from a nine-month high hit earlier this year as overheated inflation readings and signs of strength in the US jobs markets indicated that the Federal Reserve had enough impetus to keep raising interest rates in the near term. Still, gold and other precious metals could benefit from safe-haven buying later in the year, especially if slowing economic growth forces the Fed into reversing its hawkish Markets are now uncertain over where U.S. interest rates will peak this year, with some analysts positing a potential terminal rate of over 6%. Rising interest rates boost U.S. Treasury yields, which in turn increase the opportunity cost of holding non-yielding assets such as gold. The yellow metal plummeted in 2022 as the Fed embarked on an aggressive rate hike spree to curb inflation. Focus this week is also on the personal consumption expenditures price index reading for January. The data, which is the Fed’s preferred gauge of inflation, is expected to have remained steady in January from the prior month, indicating sustained inflationary pressure.