Market prediction with these policies!
The gold market was one of the most stable, mixed, and the most aimless markets in the past months. Now, considering the market situation, Gold traders and investors are looking forward to seeing what they have to expect from their investments?
The gold market mostly depends on some factors, US Dollar, Bond Yields, Market risk, and FED policies! Let's go through all of them, one by one.
About the market risk, the VIX chart is falling in the past few days. Market concerns over the Omicron variant are decreased as it is already clear that is less dangerous than other variants. Even some countries like Spain stopped the daily report on corona cases, deaths, and so on. On the other hand, in the past few days, the market was started pricing on the possibility of 4 rate hikes in 2022, which increased the market risk, however, with today's FED chair comments about inflation, we cannot price too much on that, as Mr. Powell told that "We probably remain in an era of very low-interest rates." This comment by itself decreased the market risk as well. Lower risk usually decreases the Gold demand as well, however, we should not forget that the US dollar is also weaker on this comment, as its Safe-haven demand decreased.
Weaker or stronger USD means stronger or weaker Gold. Today's gold gains mostly were because of more than 0.35% fall in the US dollar rate. At the same time, Retreat from the possibility of a very rapid increase in interest rates eased the US 10-years Bond Yields and stopped its bull rally. Lower bond yields also supported the gold's rally.
And now the question is that how far these bulls can go? What is very interesting is that from now the FED Balance sheet will be important. While for much of its history, it was not such important for investors, now market participants will be looking at that to know how far FED can go with QE and bond purchases program or even holding the interest rates on the lower levels. FED Balance sheet publishing every Thursday, and includes items that might seem at first glance typical of most company balance sheets. It lists all assets and liabilities of FED, providing a consolidated statement of the condition of all 12 regional Federal Reserve Banks. Today, Mr. Powell said: "We haven't made any decisions regarding balance sheet reduction, and we will talk again about it at the January meeting.” However, at the same time, he said that "Reducing balance sheet this time will be 'sooner and faster." as it “is far above where it needs to be." That means that Gold price can increase in the short term, at least before the FED meeting till we know the exact plan of FED for the fate of its Balance Sheet!
Gold Technical outlook
Gold has turned to a soft bullish bias, as you can see the price over the daily moving averages (20 & 50 DMAs) that became so close to each other as well (1,797 & 1,802). In the started uptrend, gold’s first resistance was the January 6 high at $1,811.54, which has been breathed. And now, the January 3 high at 1832, is the next target. On the flipside, breaching under pivot point at $1,800, 100-DMA at $1,793, and then 1,787 and 1,767 are the next targets.
