Gold Price Forecast: XAU/USD to remain vulnerable amid climbing yields and strong dollar – Commerzbank

Gold price is on the retreat again. Strategists at Commerzbank expect the yellow metal to stay offered as rising yields lift the dollar.

US interest rate at its highest level since August 2009

“The renewed price weakness was triggered by a noticeably stronger US dollar again and rising bond yields as further pronounced rate hikes by the Fed are anticipated. This puts the real US interest rate using market-based inflation expectations at 1.7%, its highest level since August 2009. This makes gold less attractive as a non-interest-bearing investment.”

“For as long as the headwind generated by the US dollar and climbing (real) yields persist, gold is likely to remain on the defensive.”

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EUR/USD could tumble close to the 0.90 level before year-end – MUFG

EUR/USD has dipped under 0.97. Economists at MUFG Bank expect the pair to inch closer to the 0.90 level before the Federal Reserve pauses its hike cycle.

The risks are firmly to the downside

“Over the near-term, the risks are firmly to the downside and we expect a period of further US dollar strength as financial market conditions worsen as asset prices correct further to the downside. This will help push inflation expectations further lower.” 

“The key for any broad turn in US dollar strength must be a pause in the tightening cycle. We suspect the Fed will pause after hiking in December which should allow some EUR/USD correction from levels closer to 0.9000.”

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USD Index Price Analysis: Another drop to 110.00 stays in the pipeline

DXY recedes modestly to the 112.00 region on Friday.

Losses could gather pace and attempt another test of 110.00.

DXY comes under some tepid selling pressure after two consecutive sessions with gains at the end of the week.

The index faces an immediate risk with the release of the Nonfarm Payrolls. A negative surprise could encourage sellers to return to the market and drag the dollar to the area of recent lows in the proximity of the 110.00 mark.

On the upside, there is still scope for a move to the 2022 high near 114.80 (September 28).

The prospects for extra gains in the dollar should remain unchanged as long as the index trades above the 7-month support line near 107.50.

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 102.84.

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Gold Price Forecast: XAU/USD to sustain a move downward – TDS

Gold price has extended its gains above $1,720. Nonetheless, strategists at TD Securities still believe that XAU/USD is likely to trend lower.

Shanghai traders start to shy away from gold

“A prolonged period of restrictive rates suggests traders should ignore gold's siren calls, as a sustained downtrend will likely prevail, while quantitative tightening continues to drive real rates higher.”

“Money managers hold their largest net short in gold since 2018, driven by trend followers. We expect a break north of $1,740 could fuel CTA stop-outs, suggesting the squeeze could run further.” 

“Shanghai traders have shied away from precious metals, leaving the market with fewer offers.”

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USD Index rebounds from recent lows and retests 110.50 ahead of data\

The index reverses the recent pullback and advances to 110.50.

US yields attempt a mild recovery across the curve.

ADP Report, ISM Non-Manufacturing take centre stage in the docket.

The greenback regains the smile following the recent sharp decline and retakes the 110.50 region when gauged by the USD Index (DXY) on Wednesday.

USD Index now looks to data

The index picks up some pace and partially reverses two consecutive daily drops amidst some loss of momentum in the risk complex in light of the recent needle-like rebound, particularly in the euro and the British pound.

The recovery in the buck so far comes in tandem with a tepid bullish attempt in US yields across after two consecutive sessions closing with gains, especially in the short end and the belly of the curve.

Interesting calendar in the US later on Wednesday will see the usual weekly MBA Mortgage Applications due in the first turn seconded by the ADP Employment Change Report for the month of September, Balance of Trade results, final S&P Global Services PMI and the ISM Non-Manufacturing.

In addition, Atlanta Fed R.Bostic (2024 voter, hawk) is also due to speak.

What to look for around USD

A hint of a recovery seems to have emerged around the dollar midweek after some decent support appears to have turned up near the 110.00 neighbourhood.

While the near-term outlook for the dollar looks somewhat dented, the firmer conviction of the Federal Reserve to keep hiking rates until inflation looks well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market continues to prop up the underlying positive tone in the index.

Looking at the more macro scenario, the greenback also appears bolstered by the Fed’s divergence vs. most of its G10 peers in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.

Key events in the US this week: MBA Mortgage Applications, ADP Employment Change, Balance of Trade, Final Services PMI, ISM Non-Manufacturing (Wednesday) – Initial Jobless Claims (Thursday) – Nonfarm Payrolls, Unemployment Rate, Consumer Credit Change, Wholesale Inventories (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is gaining 0.28% at 110.51 and faces the next up barrier at 114.76 (2022 high September 28) seconded by 115.00 (round level) and then 115.32 (May 2002 high). On the other hand, a breach of 110.05 (weekly low October 4) would open the door to 109.35 (weekly low September 20) and finally 107.68 (monthly low September 13).

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AUD/USD: Tighter financial conditions to pressure aussie before recovery in 2023 – MUFG

The Australian dollar weakened sharply in September as financial conditions tightened globally. This trend is set to persist for the rest of the year, economists at MUFG Bank report.

Sharp housing market correction is a clear downside risk

“The economy in Australia remains resilient but there are signs of weakness in the housing market. While the still strong labour market is reason for optimism on the outlook for the economy, a sharp housing market correction is a clear downside risk.” 

“With global equities and commodities set for further declines before year-end as major central banks continue to tighten aggressively, we see all currencies weakening further against the US dollar through to year-end. Assuming equities then bottom and central banks are allowed to pause, some reversal for AUD/USD next year seems likely.”

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EUR/USD to remain glued into the lower half of September’s 0.95-1.02 range – SocGen

The US economy dictates EUR/USD prospects. Therefore, the EUR/USD is unlikely to race higher as the American economy continues to outperform the eurozone, Kit Juckes, Chief Global FX Strategist at Société Générale, reports.

It is hard to see the euro staging much of a rally

“The US has been outperforming the eurozone since mid-2021, and that outperformance has been accompanied by a rising dollar. It shows no signs of abating.”

“We’ll see what this afternoon’s US ISM data throws out (the consensus looks for a fall from 53.8 to 52.4), but if the US economy continues to outperform (in both manufacturing and services ISMs, and in the payroll report at the end of the week), then it’s hard to see the euro staging much of a rally.”

“Easier to see it mostly glued into the lower half of September’s EUR/USD 0.95-1.02 range.” 

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