Gold rallies, as US dollar falls

Ipek Ozkardeskaya ipekScope

The week starts with an improved sentiment. The S&P500 just avoided to close in the bear market last Friday, but the index sank its teeth into the bear zone for the first time since the pandemic selloff, and fell for the seventh straight week, for the first time since 2001.

US futures are in the positive this Monday, as some investors see opportunity in the actual market dip. But the trading conditions will likely remain choppy, and gains may remain short lived.

In the medium run, there is a stronger case building for a further retreat in the S&P500 stocks. Investors now eye a return to the 3500/3600 range, according to the latest Bloomberg survey.

FOMC minutes

On Wednesday, investors will hunt for any hints of an eventual 75bp hike from the FOMC in the coming meetings.

At this point, most of the Federal Reserve (Fed) hawkishness has already been broadly priced in - including a small chance of a 75bp hike in next meeting. Therefore, we should not see a significant, further erosion in the market mood post-minutes.

But again, that doesn’t mean that the mood is good enough for a sustained market recovery.

Oil rebounds

The possible end of the Shanghai lockdown, and the European reluctance to ban Russian oil are driving oil prices higher this morning. US crude is preparing to test the 113pb mark at the of writing.

It’s difficult to say that there is a solid upside potential in oil at the current levels, as the recession worries, and China’s zero Covid policy remain serious threats to the global demand. Therefore, the $115pb should continue act as a solid short-term resistance, and we shall see the rally fading into the $120pb, if the $115 level is cleared.

On the downside, the 50-DMA, near $105 per barrel, should continue providing a solid support to any price pullback.

Gold clears 200-DMA offers

Gold cleared the 200-dma to the upside. The latest positive push paves the way for a further rise toward the $1875/1880 range. The recent retreat in the dollar and the US yields are what support the higher valuation in gold since last week, therefore any change of direction on the dollar, and yields front could stop the rally.

Author

Ipek Ozkardeskaya

ipekScope

Ipek Ozkardeskaya began her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked in HSBC Private Bank in Geneva in relation to high and ultra-high-net-worth clients.

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