A week ago, the dollar drop caused gold and oil prices have reached inflection points.
Jerome Powell, Federal Reserve chairman, is expected to make a speech. Besides, the Labor Department will release US jobs numbers for February. For oil prices, the meeting of OPEC and its allies this month is critical.
As for gold, Powell’s speech hosted by the Wall Street Journal on Thursday will be key to decide its price movement. Fed chairman will attempt to reassure the market that the central bank has inflation under control. The country has likely increased its labor market by 165,000 jobs, compared to January’s 49,000.
Gold caught in a web of inflation confusion.
The gold trade is caught in a web of confusion now.
Wall Street banks have been speaking nonsense to redefine inflation to explain away why an asset, which has been a hedge against dollar devaluation, is getting ignored.
According to Jeffrey Halley, a head for online brokerage OANDA, the theory doing the rounds last week was that the current inflation was a cost/push inflation—not the economy destroying the “sticky” type of inflation. In this kind of environment, price rises drop out of CPI measures after one year and reflect economic expansion. In contrast, the more threatening wage/price spiral inflation remains absent, Halley said. Investors expect that since vaccines reopened developed economies, the demand for the commodity will explode. There is a surge in demand despite the walls made by the pandemic.
US weekly jobless claims caused gold’s plunge.
Last week, the data about US weekly jobless claims falling by 13% caused gold’s plunge. However, there have been significant backstories the market did not pay attention to. Snowstorms potentially disrupted filings. Besides, there were investigations over fraud claims in the state of Ohio. So, in this case, investors who have a short-sighted view of the economy would have shorted gold.
On Monday, gold for April delivery on NY COMEX was up 1.4% or $24.60 at $1,753.40 per ounce.
On Friday, the yellow metal dropped to its lowest level since June and settled down 2.6%. In February, the precious metal lost 6.6%. It has been gold’s most significant drop since 2016.
Spot gold was up 1.2% or $20.08, to $1,754.48.
Kumar Dixit from SK Dixit Charting stated that the yellow metal could rebound to go above $1,800. He explained that as long as spot gold is above $1709, the upward move will likely touch the 10-Day Exponential Moving Average of $1,771. Subsequently, the 20 Day Simple Moving Average of $1,796, the 50 Day EMA of $1,820. If prices maintain above the 50-Day EMA, spot gold may scale the 100-Day SMA of $1,848 and 200-Day SMA of $1,882.
