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Gold Prices May Rise Despite Muddled Yellen Remarks

  • Leader
    May 12, 2021
    Gold prices rose slightly during Wednesday‘s APAC trading session
    after falling nearly 0.8% a day ago. US Treasury Secretary Janet Yellen
    clarified that she wasn’t trying to predict interest rate hikes to rein
    in inflation pressure following a hawkish-biased comment on Tuesday.
    Markets have perhaps over-reacted on her earlier words, underscoring the
    fragility of risk assets amid fears about tapering Fed stimulus. A
    stronger US Dollar index pulled gold prices lower on Tuesday before
    giving up some gains. This could provide a basis for gold to recover
    some lost ground and move higher.To get more news about WikiFX, you can visit wikifx.com official website.



      The recent rise in base metal, energy and agriculture prices has
    led to higher inflation expectations, which may boost the appeal of gold
    as a perceived inflation hedge. Signs of quickening price growth have
    pulled real yields (nominal yield – inflation) lower this week. The rate
    of the 10-year inflation-indexed security fell 6bps to -0.84% from
    -0.78% seen last Friday. Lower real yields may serve as a positive
    catalyst for gold prices, as the opportunity cost of holding the
    non-interest-bearing metal decreases.



      Although recent robust US economic data pointed to a
    stronger-than-expected recovery, the outlook remains clouded by a third
    viral wave that hit many other parts of the world. This could lead to
    weaker overseas demand, delays in economic reopening and supply chain
    disruptions. Against this backdrop, the Federal Reserve may continue to
    adopt accommodative monetary policy until its long-term inflation and
    employment targets are met. The central banks dovish stance is backed by
    Fed Chair Jerome Powell and President of the New York Fed John
    Williams, both of whom said it is still far to consider tightening.

    Looking ahead, the US ADP private payrolls report will be closely eyed
    alongside several speeches from Fed official today. Thursday‘s BoE
    interest rate decision and Friday’s US nonfarm payrolls print will also
    be watched by gold traders for clues about inflation and the strength of
    the US Dollar. Higher-than-expected job creation may strengthen yields
    and the US Dollar, potentially weighing on precious metal prices. The
    reverse may be true if the numbers disappoint. Find out more from the
    DailyFX calendar.



      Technically, gold has likely entered an “Ascending Channel” as
    highlighted on the chart below. An upward channel is formed by
    consecutive higher highs and higher lows and can be easily recognizable
    as a trending market. The ceiling and the floor of the channel can be
    viewed as immediate resistance and support levels respectively.



      On the gold chart, the “Ascending Channel” is part of a larger
    “Double Bottom” pattern, which hints at further upside potential. A key
    resistance level can be found at US$ 1,800, breaking above which would
    likely intensify near-term buying pressure and carve a path for price to
    challenge US$ 1,818 – the 5