Weekly #Gold Forecast (19-25 March 2023)
Fundamental Analysis & Market Sentiment
I wrote in my previous piece on 12th March that the best trade opportunity for the week was likely to be short of the AUD/CHF currency cross. Unfortunately, the price rose over the week by 2.25%.
The news is dominated by three major issues:
- A continuing banking crisis. Credit Suisse shares plummeted to an all-time low as the bank neared collapse earlier in the week, following the failures of Silicon Valley Bank and Signature Bank in the USA. Credit Suisse secured a $54 billion bailout from the Swiss National Bank and will now likely be taken over by Swiss giant UBS, which is seeking another $6 billion in guarantees from the SNB. Banking stocks have had a very tough week, with First Republic in the USA now rumored to be in trouble.
- Fall in US inflation, PPI, and retail sales. US CPI data released last week showed another fall in the annualized rate from 6.4% to 6.0% as expected, and lower than expected PPI and Retail Sales data. This suggests a cooling US economy and considerably reduces pressure on the Federal Reserve ahead of their policy meeting this week on 22nd March. US stock markets ended the week higher, and a technical golden cross was seen in the NASDAQ 100 Index, while 2-Year US Treasury Yields dropped dramatically to end the week below 4%.
- ECB rate hike by 0.50%.
Markets will now be turning their attention to the Federal Reserve’s policy meeting this Wednesday, having moved from expecting a 0.25% or even a 0.50% rate hike just a few days ago, to a consensus expectation narrowly in favor of a rate hike of 0.25%, while almost half of analysts are expecting no hike at all.
There were a few other significant data releases last week:
- UK Budget – there were no major surprises, but the government is now forecasting no recession in the UK, and a rapid decline in inflation. This helped strengthen the British Pound.
- New Zealand GDP – this came in much worse than expected, showing a decline of 0.6% over the previous quarter when a decline of only 0.2% had been expected.
The Week Ahead: 20th March – 24th March 2023
The coming week in the markets is likely to see an even higher level of volatility than last week, due to ongoing fear of bank contagion and the US Federal Reserve’s policy meeting which may bring yet another rate hike. This week’s key releases are, in order of importance:
- UK CPI (inflation) data
- Canadian CPI (inflation) data
- US Federal Funds Rate, FOMC Statement & Projections
- SNB Policy Rate & Monetary Policy Assessment
- UK Official Bank Rate & Monetary Policy Summary
- US Unemployment Claims
- Flash Services & Manufacturing PMI data for USA, UK, Germany, and France
- It will be a public holiday in Japan on Tuesday.
Gold
Last week saw the strongest price rise by Gold seen since November last year. The price chart below shows an extremely strong and large bullish candlestick was printed, which closed right on its high, ending at an 11-month high price, which is usually a bullish sign.
The price ended the week below $2000 but within sight of its all-time high price made in March 2022.
Trend and breakout traders should seriously consider buying Gold even just on these technical indications. The deeper reason why Gold is rising is probably due to the decline in the US Dollar as a safe haven due to the banking crisis, and due to the banking crisis itself. Bitcoin also seems to be playing a similar rose to Gold now.
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