Weekly Fundamental Gold Price Forecasts – Dovish Central Banks Give Bulls More Wiggle Room
Gold futures closed up nearly 2% last week, boosted by accommodative tones from three leading central banks – the Reserve Bank of Australia (RBA), the US Federal Reserve and the Bank of England (BoE). The actions taken by these central banks apparently reassure gold buyers that interest rates will not rise for months, giving the green light to the possibility of a price hike in the near term.
Last week, December Comex gold came in at $ 1,816.80, up $ 32.90 or + 1.84%.
RBA Says Inflation Too Low To Raise Rates
On Tuesday, the Reserve Bank of Australia (RBA) dampened investor hopes of a hawkish pivot, kicking off a big week of monetary policy that included decisions by the Federal Reserve and the Bank of England.
The RBA stressed that inflation was still too low, although it also omitted its previous projection that rates are unlikely to rise until 2024 and abandoned a key target for the April government bond. 2024.
The Fed unveils its reduction plan and reaffirms that inflation is “transient”
Last Wednesday, the Federal Reserve leaned on the campaign for a full recovery in US employment, reaffirming its belief that current high inflation should “be transient” and, despite the risks to this point of vue, arguing that price pressures will ease and pave the way for increased employment and economic growth in the months to come.
Even as the US central bank announced that it was withdrawing one of its main tools in the fight against the pandemic, reducing its massive bond buying program from this month, its latest policy statement and the Remarks by Fed Chairman Jerome Powell at a press conference indicated that it would remain patient – and wait for more job growth – before raising interest rates.
Bank of England suspends rate hike
The BoE kept rates on hold on Thursday, offending investors who were convinced it was poised to become the first of the world’s major central banks to raise borrowing costs amid the pandemic of COVID-19.
“The Bank of England was obviously more accommodating than us and the market expected,” BofA Securities analysts said in a note released Friday.
“As we grapple with the new narrative and postpone our first expected hike until February – although the call from December to February is difficult – the overall message is that regardless of when these hikes come, the the market seems to price too much. “
Bullish reaction to Friday’s strong US non-farm payroll report shows investors believe a strong report won’t change what Federal Reserve Chairman Jerome Powell signaled at his press conference after the political meeting.
Still, with the Fed not due to meet until December, the near-term focus will be on US economic data and speeches from Fed members.
This week, Fed Chairman Powell will deliver speeches on Monday and Tuesday. Traders hope he will reveal more about the timing of the first post-pandemic rate hike. Although he probably won’t deviate much from last week’s conciliatory tone.
Economic reports include the monthly producer price index (PPI) and the monthly consumer price index (CPI). The PPI is expected to continue to climb with trader prices in a reading of 0.6%, down from 0.5%. The CPI is expected to rise 0.5% from 0.4%. Core CPI is expected to post an increase of 0.4%, from 0.2%.
Gold traders should keep an eye on the timing of the RBA, Fed and BoE rate hikes. Right now, this shows that the RBA won’t hike rates until 2024, the Fed before June or July 2022, and the BoE maybe in December 2021.
This gives gold bulls enough time to enjoy a strong near-term rally with $ 1,839.00 a key bullish target this week. It is also the trigger for an upward acceleration.
For an overview of all of today’s economic events, check out our economic calendar.
This article originally appeared on FX Empire