Created
: 2024.10.14
2024.10.14 20:06
Gold (XAU/USD) recovers to trade back in the $2,660s on Monday amid rising safe-haven demand after saber-rattling by the Chinese People's Liberation Army (PLA) in the strait of Taiwan. This prompted a spokesperson from the US Department of State to say on Monday, that they were "seriously concerned" with the PLA's activities in around Taiwan.
Gold may also be gaining due to a more positive outlook for the Chinese economy as the country is the largest market for the precious metal. On Saturday, Chinese Finance Minister Lan Fo'an announced a much-anticipated fiscal stimulus programme. Although no figures were given, he said Beijing would help regional governments tackle their debt problems with a large-scale local government debt swap.
Lan further suggested the government's stimulus package could mark a multi-year turning point in China's "fiscal policy framework".
A further driver for Gold is the continued downward projected path of interest rates globally. The European Central Bank (ECB) will conclude its October meeting on Thursday and most analysts expect the bank to announce another 25 basis point (bps) (0.25%) rate cut - their second cut in a row. Such a move would signal a significant "gear change up" in terms of the pace and timing of the ECB's easing cycle.
In the US, meanwhile, investors expect a 25 bps rate cut from the Federal Reserve (Fed) in November after US Producer Price Index (PPI) inflation data on Friday showed headline PPI was unchanged on a monthly basis in September - missing expectations of a 0.1% increase and the prior month's 0.2% reading. Core PPI inflation, which excludes volatile food and energy prices, slowed to 0.2% from 0.3% in August.
Annual readings, however, resulted mixed, as PPI decelerated while core PPI rose by 2.8%, above the prior month's 2.6%. Although mixed annual performance, the monthly readings weighed, as did the preliminary US Michigan Consumer Sentiment Index for October, which fell below September's reading and analysts' estimates.
The CME FedWatch Tool is showing the markets are now pricing in around a 90% chance of a 25 bps Fed rate cut - up from 83% before the PPI data.
Gold appears to have completed a correction at the October 10 lows and is rising again.
It has reached a resistance level at around $2,670 from a row of previous highs including the October 1 and 4 highs (dashed line). A close above would probably lead to a continuation up to the $2,685 all-time high.
The Moving Average Convergence Divergence (MACD) has risen above the zero line and is in positive territory, which is a mildly bullish indication.
There is also a chance the pair could bounce off resistance and start pulling back down into its familiar range between $2,620 and $2,670. This would extend the range-bound move seen since late September.
Gold's medium and long-term trends are also bullish. If one of these longer-term cycles resumes, it could, in theory, push the asset to even higher highs.
One of the three key interest rates set by the European Central Bank (ECB), the main refinancing operations rate is the interest rate the ECB charges to banks for one-week long loans. It is announced by the European Central Bank at its eight scheduled annual meetings. If the ECB expects inflation to rise, it will increase its interest rates to bring it back down to its 2% target. This tends to be bullish for the Euro (EUR), since it attracts more foreign capital inflows. Likewise, if the ECB sees inflation falling it may cut the main refinancing operations rate to encourage banks to borrow and lend more, in the hope of driving economic growth. This tends to weaken the Euro as it reduces its attractiveness as a place for investors to park capital.
Read more.Next release: Thu Oct 17, 2024 12:15
Frequency: Irregular
Consensus: 3.4%
Previous: 3.65%
Source: European Central Bank
Created
: 2024.10.14
Last updated
: 2024.10.14
FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.
We hope you find this article useful. Any comments or suggestions will be greatly appreciated.
We are also looking for writers with extensive experience in forex and crypto to join us.
please contact us at [email protected].
Disclaimer:
All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.
The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.
Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy