FED AND ECB confuse the gold market

By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all

The FED and ECB confused the markets with FED giving a hawkish pause and a promise of two more rate hikes, while ECB raised the interest rates and hinted at a rate hike again next month.

A pause is good for gold, but it was the most hawkish pause in Interest rates. Gold prices broke important support of $1950 as a result of conflicting signals from the Federal Reserve. But Gold prices rebounded the next day from the level of $1935 as the dollar tested a multi-week low on the ECB rate hike and hinted at a rate hike again next month. Following the ECB meeting, the euro gained overall strength as a result of hawkish expectations.

Both banks are hawkish about the economic outlook, which one day strengthened the dollar and the other day the euro. The price of gold is still waiting for evidence that the FED is truly fully completed, with rate hikes as well as a US dollar-deflationary catalyst.

Market analysts claim that the Federal Reserve is flying blind into an ugly recession in the first quarter of 2024 because it doesn’t know what it is doing. The money supply has decreased by 4.6% since last April. Because of the money supply’s sharp decline, inflation is falling very quickly. Eventually, the economy will also experience a sharp economic decline.

After the FED indicated in new projections that borrowing costs might still need to rise by as much as half a percentage point by year’s end, traders are now pricing in a 74% chance of a 25-basis point rate hike in July.

In June, the price of gold fluctuated between $1935 and $2000. Gold has been moving sideways for so long that a larger move in one direction or the other is overdue. It could retest the $1880 (~Rs 57000) level, if the $1935 (~Rs 58700) level breaks, or it could rise above $1985 (~Rs 59600) to reach $2025 (~Rs 61500).






Disclaimer: This report contains the opinion of the author, which is not to be construed as investment advice. The author, Directors, and other employees of Augmont Enterprise Private Ltd. and its affiliates cannot be held responsible for the accuracy of the information presented herein or for the results of the positions taken based on the opinions expressed above. The above-mentioned opinions are based on information, which is believed to be accurate, and no assurance can be given for the accuracy of the information. The author, directors and other employees and any affiliates of Augmont Enterprise Private Ltd cannot be held responsible for any losses in trading. In no event should the content of this research report be construed as an express or implied promise, guarantee or implication by or from Augmont Enterprise Private Ltd. that the reader or client will profit or the losses can or will be limited in any manner whatsoever. Past results are no indications of future performance. Information provided in this report is intended solely for informative purposes and is obtained from sources believed to be reliable. The information contained in this report is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. We do not offer any sort of portfolio advisory, portfolio management or investment advisory services. The reports are only for information purposes and are not to be construed as investment advice

Share on