Gold holds steady ahead of US Fed chairman’s speech
· Gold held steady on Wednesday as market participants stayed away from making big bets ahead of a speech by Federal Reserve Chairman Jerome Powell amid rising speculation the United States could one day adopt negative interest rates.
· Spot gold was unchanged at $1,701.51 per ounce by 0326 GMT. U.S. gold futures fell 0.1% to $1,704.50 per ounce.
· “This kind of indecision (by investors) really has to do with uncertainty about whether the Fed would be successful with all this stimulus and a desire for liquidity,” DailyFx currency strategist Ilya Spivak said.
· “Central banks have already deployed a giant wave of stimulus and are waiting for this lockdown to end to see if that is enough,” Spivak said, adding speculation that the United States might adopt negative rates will support gold.
· President Donald Trump on Tuesday again urged the U.S.central bank to adopt negative interest rates. Last week, U.S. money market instruments started to price in a chance of negative rates.
· Markets are now waiting for Powell’s speech at 1300 GMT for clarity on the health of the U.S. economy.
· Massive stimulus measures support gold as it is used as a hedge against inflation and currency debasement.
· An estimated $15 trillion worth of stimulus has already been unleashed by central banks and governments to shield their economies from the coronavirus pandemic.
· Underscoring the deeper economic impact of the virus, U.S. consumer prices dropped by the most since 2008 in April, while 20.5 million Americans lost their jobs in the month — the deepest fall since the Great Depression.
· The International Monetary Fund’s managing director said it was “very likely” the Fund would cut global growth forecasts further as the pandemic was hitting many economies harder than previously projected.
· Highlighting investor appetite for the bullion, SPDR Gold Trust holdings, the world’s largest gold-backed exchange-traded fund, rose 0.24% to 1,083.66 tonnes on Tuesday.
· Gold Price Prediction – Prices Rise but Remain Range bound as CPI Drops
Gold prices moved higher on Tuesday but continues to trade in a tight range. The dollar also moved lower trading sideways which helped buoy the yellow metal. After running up on Monday, US yields gave back some of their gains with the 10-year losing 4-basis points down to 68-basis points and the 2-year also slipping 1-basis points. US consumer prices fell in April notching up the largest drop since 2008.
Technical Analysis
Gold prices moved higher but continue to consolidate in a tight range. The range is getting tighter and energy is building up. A break either way will release the energy and likely generate a trend. The weekly chart has formed a bull flag continuation pattern which is a pause that refreshes higher. Support is seen near an upward sloping trend line that comes in near 1679. Resistance is seen near a downward sloping trend line that comes in near 1719. Short term momentum has turned negative as the fast stochastic generated a crossover sell signal. The trajectory is flat which means that this could glide lower. Medium term momentum is also negative as the MACD (moving average convergence divergence) histogram is printing in the red with a downward sloping trajectory which points to lower prices.
· Palladium inched down 0.1% to $1,859.14 per ounce, while silver gained 0.4% to $15.47, and platinum rose 1.4% to $764.11.
Reference: CNBC, FX Empire
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