XAUUSD prices deteriorated about 3.5% in the worst weekly performance since June 2021 despite a surge in Gold initially happened amidst the outbreak of Russia’s attack on Ukraine. The continuing price action in Gold continues to underline the challenging road ahead for it to be able to gain meaningful upside price action, lacking additional escalation around Ukraine.
With high inflation penetrating worldwide, newly boosted by geopolitical conflicts in Europe, central banks have been stepping up. Last week, the Federal Reserve began its rate hike cycle as the Bank of England continued its own. Gold prices are typically viewed as an anti-fiat instrument, given that the yellow metal has no inherent yield for traders holding on to it.
In a rising interest rate setting, especially globally, that makes holding Gold relatively less attractive. On the chart below, gold can be seen pointing lower in recent days as the US Dollar and 10-year real yields climbed. The latter is generated by subtracting the difference between nominal and breakeven rates, yielding the inflation-adjusted return.
The week ahead is comparatively light in terms of economic event risk, placing the focus for gold on broader fundamental themes. This is mostly a combination of where Ukraine and bond yields are heading. A lot of Fed speeches will create volatility, varying from Chair Jerome Powell to San Francisco branch president Mary Daly, to St. Louis branch president James Bullard.
We expect, Gold to range with big volatility, sensitive on the news on Ukraine and the Fed speeches. As geopolitical risks rise, also XAUUSD rise.
Warning:
Trading on CFDs involves a high level of risk, including full loss of your trading funds. Before proceeding to trade, you must understand all risks involved and acknowledge your trading limits, bearing in mind the level of awareness in the financial markets, trading experience, economic capabilities and other aspects.
Disclaimer:
Market Trends, Charts, Trading Ideas or other information provided by BKFX (Pty) Ltd and/or third parties are not intended as an investment advice and/or recommendation. The information provided is not presented as suitable or based on your specific need. You are responsible for your own investment decisions and you should not trade with money you cannot afford to lose. Any views or opinions presented in this Article are solely those of the author and do not necessarily represent those of the Company, unless otherwise specifically stated. The Company may provide the general commentary which is not intended as an investment advice and must not be construed as such. Seek advice from a separate financial advisor if an investment advice is needed. The Company assumes no liability for errors, inaccuracies or omissions, inaccuracies or incompleteness of information, texts, graphics, links or other items contained within this article/material.