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Over the five-day period, the DXY Index jumped 1.3%, while Treasury curve shifted sharply higher after the Federal Reserve signaled in no uncertain terms that it is leaning towards front-loading hikes and outlined an aggressive plan to prune its balance sheet to cool down inflation.
Typically, greenback strength in the forex space and rising nominal and real yields should be enough to undermine precious metals, which offer no coupons, dividends, or tangible cash flows.
It is difficult to predict how the crisis will play out, but some investors believe that the worst is not over and are therefore reluctant to start trimming safe-haven positions.
Whether or not those expectations are justified is another matter, but fragile sentiment reflected in high volatility and weakness in equities is prompting traders to hedge against potential downside risks.
Conflicting market forces will prevent gold from rising or falling meaningfully until one of the catalysts acquires an advantage anda clear preponderance over the other.This means that the near-term trading outlook for XAU/USD is neutral.
In terms of economic releases to watch, the week ahead has several high-impact events, but the latest inflation report is likely to receive the most attention.
Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors.