Over the past four weeks, the “bulls” of the gold market have successfully kept prices above the $ 1,800 mark, first trading of the new 2022, a real battle was waiting for them. However, on Monday, the bulls experienced a kind of deja vu, suffering the heaviest losses in the last six weeks due to a jump in government bond yields and the U.S. dollar amid the prospects of an early increase in the critical rate.
And although the market was able to win back the initial drawdown by 1.5%, prices barely held above the $1,800 border.; futures ended the New York session at $1,800.10 per ounce, and spot prices were $1,800.85.
It is worth noting the ambiguity of the whole picture. On the one hand, gold finds support from those who consider it a hedge against high inflation. But, on the other hand, the “Bears” are pulling prices background of the growth of the dollar and the yield of ten-year U.S. government bonds.
Strong resistance above the $1830 mark Yesterday’s dynamics demonstrated another vital point: strong resistance above the $ 1830 mark per ounce. Immediately after opening at $1,830.10, gold reached $1,833, but then rapidly collapsed to $1,798.20.
Spot prices behaved similarly: the initial increase from $1830.14 to $1832.06 by a reversal to $1797.93. On Wednesday, this trend may intensify, as the Federal Reserve will publish the minutes of its December meeting, which may contain hints about the expected pace of a critical rate increase. The $1,830 wall may turn out to be a long-term ceiling in the event of uncertainty about the speed of monetary policy tightening and how many bases points the regulator will add to the rate in one round.
Gold is considered a means of protection against inflation. Still, the past year’s events have shaken this belief, as metal prices have steadily fallen in the face of increasing price pressure in the U.S. economy, which was actively struggling with the consequences of the pandemic. In addition, gold also often fell due to the dynamics of the dollar and the yield of U.S. government bonds amid expectations of a rate hike by the Federal Reserve.
The central bank has developed an accelerated schedule for curtailing incentives; he for three rate hikes in 2022, but his goal is to achieve 2 percent inflation and 4 percent unemployment.
(which is considered full employment), so the absolute number of rounds of policy tightening may change.
It is unlikely that the Fed will hold all the rounds of rate hikes planned for this year. However, if employment growth slows down again for some reason, gold may once again become a hedging tool, writes Philip Struble, strategist at Chicago Blue Line Futures (after the outbreak of COVID-19), the rate in the U.S. soared to a record 14.8%. Still, last month the figure was already 4.2%.
However, the consumer price index and the primary price index of personal consumption expenditures (with which the Fed measures inflation) reached 40-year highs in November.
News of a rate hike almost always harms gold; for example, last year, prices fell by 3.6%, the first decline in the previous three years and the sharpest drawdown since 2015. However, do not rush to write off the gold from the accounts. If inflation remains in the spotlight in 2022, the metal may still try to rewrite the 2020 highs above the $2,100 mark (way were the result of fear of inflation), what the “bulls” of the precious metals market are counting on.
Chief Technical Strategist skcharting.com Sunil Kumar Dixit, whose materials in the preparation of articles on commodities calls the range $1790-1798, which will be a “strong reference zone.” “Any attempt to resume the bullish trend will require resolutely eliminating the resistance cluster in the range of $ 1830-1835 and then closing the weekly candle above the previous local peak of $ 1877,” he says.
The value of the StochRSI on the daily chart at 51/73 is “bearish” and is located RSI value at 50. At the same time, on the weekly timeframe, the StochRSI at 71/55 is bullish, also being above the RSI (50). A steady move above $1,800 should help gold retest the $1,825 mark and reach $1,835,” he adds. “If the metal finds sufficient support above $1835, the next stage will be an increase to $ 1860-1880.
However, Dixit, who primarily focuses on the technical picture, nevertheless notes that fundamental factors will determine the dynamics of gold in 2022.
In addition, a detailed study of the longer-term picture (i.e., the monthly timeframe) shows that gold is likely to remain volatile and will trade in a sideways trend with a bearish bias during the two quarters of 2022,” says Dixit. Only in the second half of 2022, the metal may become the object of unprecedented demand from retailers, institutions, hedge funds and c, central banks, which will have a cumulative effect on the price and push it to new record highs.
And this is although at the plans to start raising rates from the second half of the year. So for holders of long positions, patience will be the paramount virtue.”