Gold Price Analysis: XAU/USD slides to $1810s, eyes annual lows after fourth successive weekly decline

Gold prices continue to trade with a negative bias in the upper $1810s as the buck remains resilient.

XAU/USD looks on course to post its fourth successive weekly decline and worst weekly performance since June 2021.

With the 200DMA broken, technicians are eyeing support in the form of annual lows around $1780 as the next target.

Spot gold (XAU/USD) prices continue to trade with a negative bias on the final trading day of the week, having hit their lowest levels in more than three months just above $1810 earlier in the session. At current levels in the upper $1810s per troy ounce, gold is trading about 0.2% lower and looks on course to post a weekly loss of around 3.5%, which would mark a fourth successive week in the red and gold’s worst weekly performance since June 2021.

The main driver of gold weakness this week has been the strength of the US dollar, with the Dollar Index (DXY) looking on course to close out the week close to multi-decade highs in the upper 104.00s. A stronger US dollar makes USD-denominated commodities like XAU/USD more expensive for international buyers.

The buck’s resilience on Friday comes despite a rebound in risk appetite which has seen stocks and crypto rally, arguably burnishing gold’s safe-haven appeal. Price action in US bond markets has also been unfavourable for the precious metal this week. While nominal yields (though higher on Friday) look set to end the week substantially lower, real yields are little changed.

That means lower inflation expectations (to be exact, 10-year breakevens have fallen over 20 bps this week to under 2.70%, their lowest since early March), implying a reduced demand for inflation protection. This hurts gold, given the asset is often seen as a hedge against inflation.

Fed chair Jerome Powell’s remarks on Thursday didn’t seem to rock the boat much. He reiterated that he sees 50 bps rate hikes at upcoming meetings as appropriate. Looking ahead on Friday, gold traders will be watching the release of the US University of Michigan Consumer Sentiment survey for May at 1500BST for insights as to how US consumers are holding up in the face of still sky-high inflation.

Any fresh commentary from Fed speakers that might move the needle regarding tightening expectations would also be worth noting. With XAU/USD having broken below its 200-Day Moving Average on Thursday, many technicians predict further downside towards annual lows in the $1780 area.

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USD/CHF slides further below 0.9900 mark amid weaker USD, focus remains on US CPI

USD/CHF corrected sharply on Wednesday and snapped a four-day winning streak.

Retreating US bond yields prompted some USD profit-taking and exerted pressure.

The risk-on mood might undermine the safe-haven CHF and limit any further losses.

The focus remains glued to the release of the latest US consumer inflation figures.

The USD/CHF pair added to its intraday losses and dropped to a fresh daily low, around the 0.9870 area during the first half of the European session.

The pair witnessed heavy selling on Wednesday and snapped a four-day winning streak to its highest level since May 2019, around the 0.9975 touched the previous day. The ongoing retracement slide in the US Treasury bond yields forced traders to lighten their US dollar bullish bets. This, in turn, was seen as a key factor that exerted downward pressure on the USD/CHF pair.

The downside, however, seems limited amid a generally positive tone around the equity markets, which tends to undermine the safe-haven Swiss franc. Apart from this, the prospects for a more aggressive policy tightening by the Fed should help limit the downside for the buck and lend support to the USD/CHF pair, warranting caution before placing fresh bearish bets.

The Fed is widely expected to tighten its monetary policy at a faster pace to combat stubbornly high inflation. In fact, the markets are pricing in a 200 bps rate hike for the rest of 2022 amid concerns that China's zero-covid policy and the war in Ukraine would result in tight global supply chains. This could push already elevated consumer prices even higher.

Hence, the focus will remain glued to the US CPI report, due for release later during the early North American session. The data could influence the Fed's tightening path, which, in turn, would influence the near-term USD price dynamics. Hence, it will be prudent to wait for strong follow-through selling before confirming that the USD/CHF pair has topped out.

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Gold Price Forecast: XAU/USD extends losses towards $1,850 as USD rises with yields

Gold Price gets hammered amid ‘sell everything’ mode amid risk-aversion.

Flight to safety, US dollar dominate while Treasury yields keep rallying.

XAU/USD remains poised to test the $1,850 barrier, awaits US inflation.

Gold Price is tumbling alongside the US government bonds and global stocks, as investors seek refuge in only the US dollar, with risk-aversion at full steam at the start of the fresh week.

After a turbulent last week, dominated by the central banks, global growth fears are back to the fore amid extended Chinese covid curbs and fears over interest rate hikes. In times of market panic and uncertainty, the dollar remains in cruise control, courtesy of its appeal as an ultimate safe haven.

The buck also finds demand as the Fed remains ahead of the curve when compared to all the other major central banks worldwide. Despite a less hawkish stance last Wednesday, the Fed remains on track for 50 bps rate hikes at the next two meetings while beginning the balance sheet reduction process.

A stronger dollar weighs heavily on the USD-price Gold while the rally in the Treasury yields exacerbates the pain in the non-yielding yellow metal. The benchmark 10-year US rates are currently trading at 3.185%, the highest level since November 2018, on Fed rate hike bets.

Adding to the downside in Gold Price, the speculative net shorts on the metal have grown last week, as investors flock to the dollar instead ahead of the all-important US inflation data due later this Thursday.

Looking ahead, Gold Price will remain at mercy of the sentiment around the yields and the dollar. Any rebound in Wall Street stocks could pause the dollar upsurge, offering some reprieve to gold bulls.

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Dollar near 20-year highs amid global markets rout

The dollar index hovered near 20-year highs against major peers on Friday, as market sell-offs in the face of global recession fears propped up the safe haven currency.

European stocks opened lower and were heading for their worst week in two months, following a rout on Wall Street.

The U.S. currency has stood tall on expectations the Federal Reserve will tighten monetary policy faster than peers to stem runaway inflation.

A closely-watched U.S. jobs report due later on Friday could strengthen the case for aggressive tightening, analysts said.

Economists predict a solid 391,000 U.S. jobs were added last month, according to a Reuters poll.

The dollar index, which tracks its performance against a basket of six major rivals, gained as much as 0.5% in early European trading hours to hit a fresh 20-year high of 104.07.

But it later lost ground in choppy trade, and was last broadly flat at 103.55. It appeared touch and go whether the index would record a fifth straight week of gains, up 0.3% on the week.

The Fed raised rates by half a percentage point on Wednesday - the biggest jump in 22 years - but the dollar temporarily cooled on Fed Chair Jerome Powell comments that policymakers were not actively considering 75 basis point hikes in future.

"Financial market conditions will have to get tighter in order to alter central bank thinking on inflation risks and hence the US dollar is set to remain on a strengthening path for now," currency analysts at MUFG said in a note.

The euro lost as much as 0.5% against the dollar in early European trading hours, before reversing course. It was last up 0.2% at $1.05555.

Sterling was broadly flat after earlier dropping below $1.23 for the first time in nearly two years, a day after the Bank of England sent a stark warning that Britain risks a double-whammy of a recession and inflation above 10%.

The BoE also joined the Fed in raising rates, hiking them by a quarter of a percentage point to 1%.

The yen fell back slightly against the dollar, down 0.2% to 130.46 yen per dollar.

In cryptocurrencies, bitcoin weakened slightly to trade just above $36,000.

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XAU/USD at weekly high, bulls awaiting sustained move beyond $1,900

Gold gained traction for the third straight day and climbed to a fresh weekly high on Thursday.

A less hawkish Fed extended support to the metal amid the latest COVID-19 outbreak in China.

The prospects for a further tightening by the Fed revived the USD demand and capped gains.

Gold built on this week's goodish rebound from the $1,850 area, scaling higher for the third successive day on Thursday. The momentum pushed spot prices to a fresh weekly high during the early European session, though bulls struggled to capitalize on the move further beyond the $1,900 round-figure mark.

On Wednesday the Fed increased the Fed Funds rate by 50 bps in the the largest rate hike since 2000, and the beginning of quantitative tightening (QT) – but it downplayed the possibility of further super-size hikes. In the post-meeting press conference, Powell eased market fears about a more aggressive tightening path and said that the Fed was not actively considering a 75 bps rate hike in June. This, in turn, was seen as a key factor that offered some support to the non-yielding yellow metal. Apart from this, concerns about the potential economic fallout from rising COVID-19 cases and strict lockdowns in China benefitted the safe-haven gold.

That said, the markets are still pricing in a further 200 bps rate hike for the rest of 2022, which was evident from a fresh leg up in the US Treasury bond yields. This, in turn, helped revive the US dollar demand and acted as a headwind for the dollar-denominated commodity. This makes it prudent to wait for strong follow-through buying before confirming that gold has bottomed out near the $1,850 region and is positioning for a more robust near-term appreciating move.

Market participants now look forward to the US economic docket, featuring the release of Weekly Initial Jobless Claims later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to gold. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities. 

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Shelling in Russia’s Bryansk region hits parts of oil terminal – Russian news agencies

Russian air defences prevented a Ukrainian aircraft from entering the Bryansk region on Saturday, Russian news outlets reported citing the region’s governor, adding that as a result shelling hit parts of an oil terminal and adjacent territory.

Russian air defences prevented a Ukrainian aircraft from entering the Bryansk region on Saturday, Russian news outlets reported citing the region’s governor, adding that as a result shelling hit parts of an oil terminal and adjacent territory.

“There are no victims,” RIA news agency cited the governor, Alexander Bogomaz, as saying. He added that a logistics building at the terminal was damaged.

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Eurozone Economy Grew 0.2% in 1Q; France Stagnates, Germany Avoids Recession

The Eurozone economy grew by 0.2% in the first three months of the year, but its post-pandemic growth weakened sharply toward the end of the period under pressure from the war in Ukraine and record-high inflation.

Eurostat's figures, released on Friday, mean that gross domestic product was up 5.0% from a year earlier, a time when the region's economy was still laboring under the worst of the effects from the pandemic. 

Both figures were largely in line with expectations, but masked some big divergences from consensus among some of the region's biggest member states. French GDP undershot expectations to stagnate in the quarter, while German GDP rose 0.2%, defying fears that it would register a second straight quarter of negative growth, thanks to strong investment spending.

At the same time, Eurostat said that inflation in the Eurozone hit a new record high since the creation of the single currency. Consumer prices rose 7.5% in April, up from 7.4% in March. While the slower rise in the headline rate suggests that an absolute peak for inflation may be near, underlying price pressures remained strong: core CPI rose by over 1% for the second month running, and Eurostat's harmonized measure of annual inflation excluding food and energy accelerated far more than forecast to 3.9% from 3.2% last month.

The euro rose by around half a cent against the dollar in the course of the morning as national GDP data were published in advance of the Eurozone numbers. By 5:20 AM ET (0920 GMT), it was at $1.0576, up 0.8% on the day. A bounce in Chinese assets in response to promises of more economic policy support from Beijing had also helped sentiment toward the euro and to risk assets more broadly.

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