XAUUSD – Gold prices failed to get a lift from a rally in US stocks after inflation numbers gave hope for a peak.
Gold – Weekly Chart
The price of gold is still below $1,700, and the bears are still in control until that changes.
One of the key drivers of the gold decline has been the US dollar, and a 0.70% drop in the greenback was matched by a similar fall in gold. Gold was hurt by an expectation for further interest rate hikes in the US. Still, the stock market rallied partly due to options market activity and short covering.
Tomorrow sees retail sales and consumer sentiment for the US economy. A continued risk rally in stocks could lift gold back toward that critical $1,700 level. The path above there may be slow initially until there is a clear signal of a slower pace in interest rate hikes. Gold also has the potential to rally if there is an escalation of matters in Ukraine.
Due to the soaring US dollar, gold has done well for investors in other currencies. Gold is down 7.4% YTD versus the dollar but is up 16.4% in Japanese Yen and 12.3% in British pounds, according to the World Gold Council. The precious metal also rose 30% in the Turkish lira, highlighting the outperformance against the under-pressure currencies of the year.
Let’s consider gold being down only 7% for the year. It is holding up well against serious obstacles, such as the US dollar and slower growth in India and China. Cracks in the UK bond market and international pressure on the Federal Reserve could see the end of aggressive interest rate hikes in the fourth quarter of 2022.
