Thu, Jun 08, 2023 @ 08:41 GMT
HomeContributorsFundamental AnalysisGold Rallies, as US Dollar Falls

Gold Rallies, as US Dollar Falls

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.

Danske Bank
Danske Bank
This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets´ research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

Featured Analysis

Learn Forex Trading