Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

The vast majority of retail client accounts lose money when trading CFDs.

You should consider whether you can afford to take the high risk of losing your money.

Important Notice - Fraud awareness
Important Notice - Scam alert
The vast majority of retail client accounts lose money when trading CFDs.
Important Notice - Fraud awareness
Important Notice - Scam alert
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
Important Notice - Fraud awareness
Important Notice - Scam alert
The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
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XAUUSD break resistance as FOMC prolongs interest rate hikes

XAUUSD - The precious metal gold had faced strong objection from the bears yesterday after breaking the resistance at $1860 to attain a new all-time-high at $1869. The bulls quickly took profits following the FOMC meeting minutes released yesterday, which pointed to further interest rate hikes in the coming sessions. There was a bearish takeover immediately, which pushed the price of gold down to $1842. Gold is currently in a correction phase. The general sentiment in the market is presently bearish.

What are the major fundamental factors that affect gold?

Dollar Strength

When trading gold, one would soon realise prices often move in the opposite direction to the US dollar because the dollar is usually pegged to gold. To make profits from trading gold, every trader must pay attention to all factors affecting the US dollar, whether positively or negatively, to know which direction to follow on gold.

NFP

The US Non-Farm Payroll report released on the first Friday of every month at 8:30 a.m EST causes high volatility in gold. An increase in the employment rate, which is bullish for the US dollar, affects gold negatively and vice-versa.

Geopolitical Events

Gold is primarily affected by different geopolitical events across multiple countries, especially when it involves those countries that are either large suppliers or buyers of gold. The Russian-Ukraine war, for instance, had primarily affected gold from its outset when investors quickly rushed to gold as a safe haven. Gold is always the investors' favourite hedging financial instrument in moments of wars and crises.

Inflation

Gold has been viewed as a hedge against inflation. Thus the price of gold is always high when inflation rises. Inflation favours gold so much.

Interest Rate Hikes

Interest rate hikes always favour the US dollar and discount gold. Before gold started recovering again, the Fed's interest rate hike of 50 basis points sent gold to a new all-time low at $1785. The present diminishing dollar strength is a root cause of gold's recovery.

Supply & Demand

Gold is a highly sought-after commodity not just for investment purposes but also used to manufacture ornaments such as jewellery, sports medals, religious items, etc. It is also used in producing some electronic and medical devices. This means there is always a high demand for gold. However, gold supply and demand is seasonal. Every trader must pay attention to all the seasons when there is always a high demand. The prices at this point are inversely affected by the number supplied.

It is pivotal that every trader determines how these factors affect each other when trading gold prices. Combining these fundamental factors with technical knowledge lets us know the best support and resistance to place one's profit target.

Last Updated: 26/05/2022

This market commentary and analysis has been prepared for ATFX by a third party for general information purposes only. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell as it does not take into account your personal circumstances or objectives, and should therefore not be interpreted as financial, investment or other advice, or relied upon as such. You should therefore seek independent advice before making any investment decisions. This information has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. We aim to establish and maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. The market data is derived from independent sources believed to be reliable, however we make no representation or warranty of its accuracy or completeness, and accept no responsibility for any consequence of its use by recipients. Reproduction of this information, in whole or in part, is not permitted.


 

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