Gold Analysis and News:
- Gold Unwinds War Risk Premium
- Gold Bearish Below Key Support at 1880
- DAX Chart to Watch: Prior Support Now Resistance
Gold Unwinds War Risk Premium
As the mood music improves during peace talks between Russia and Ukraine, geopolitical risk premium in gold continues to unwind. Keep in mind, prior to Russia’s invasion of Ukraine, the outlook was looking rather bleak for the precious metal as the Fed were preparing to embark on the most aggressive tightening cycle in decades. This remains the case given and perhaps even more so as Powell and Co. look to hike rates in 50bps clips. Therefore, it is important for gold traders to once again focus on real yields for direction (Figure 1), which as it stands, points to lower gold prices.
As such, much like my view on risk appetite (S&P 500 fading rallies), in the absence of further geopolitical escalations, the focus will shift towards the Fed tightening financial conditions.
Gold vs US 10Y Real Yields
Source: Refinitiv
Gold Bearish Below Key Support at 1880
From a technical perspective, gold is neutral and while I am leaning towards the downside in the precious metal. Bearish conviction will grow on a break below 1880, which will also likely confirm a double top from 2070.
Gold Chart: Daily Time Frame
Source: Refinitiv
DAX Chart to Watch: Prior Support Now Resistance
Sky high inflation prints in the Euro Area, which kicked off with four decade high Spanish data at 9.8% vs Exp. 8%. German CPI prints also notably firmer. Alongside this, with the plethora of ECB speakers talking up the prospect ofending asset purchases in Q3 followed by rates hikes.
Main comment: ECB’s Kazimir – Wants ECB to end negative rates in the next 12 months. (money markets see this happening by year end)
In turn, this has prompted a shift in ECB rate expectations, which for the DAX has seen the index begin to stall at resistance (previously support) situated at 14800-15000.
Source: Refinitiv
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