Gold bears attack $1,950 support with eyes on central bankers

Markets appear dicey on early Thursday as traders await speeches from the Fed and ECB leaders, after Fed Chair Jerome Powell refrained from speaking on economy and monetary policy the previous day. Also, mixed feelings about China and geopolitical woes in Gaza join the lack of major data/events to test the momentum traders.

With this, the US Dollar edged higher while the US stock futures and the Asia-Pacific shares edged lower. That said, Wall Street closed mixed the previous day after downbeat signals from the ex-US economies pushed back optimism.

It should be noted that AUDUSD ignores softer China inflation and pares the previous day’s losses while the EURUSD and GBPUSD remain directionless. Further, Gold price pokes the key $1,950 support at the lowest level in a month whereas the crude oil traders lick their wounds with the commodity printing mild gains at the lowest level in 3.5 months.

On the other hand, optimism prevails as the crypto markets brace for the Spot Bitcoin ETF approvals. With this, the BTCUSD rises to the highest level in 18 months while the ETHUSD also jumps to a 3.5-month high.

Following are the latest moves of the key assets:

• Brent oil remains pressured at 3.5-month low despite posting mild gains near $80.40 by the press time.
• Gold price licks its wounds at a five-week low while poking the $1,950 support by the press time, down for the fourth consecutive day.
• USD Index struggles to extend the week-start recovery from a multi-week low around 105.50 as we write.
• Wall Street closed mixed but the Asia-Pacific stocks edged lower. That said, equities in Europe and the UK begin the day with mild losses.
• BTCUSD and ETHUSD both refresh multi-day high to around $36,700 and $1,920 as we write.

Unclear markets allow US Dollar to edge higher…

The mixed central bank talks joined mostly downbeat data, ex-US, to weigh on the market sentiment, together with the geopolitical woes. Additionally, upbeat signals for the Fed and hopes of witnessing the last rate hike in 2023 allow the US Dollar to push back the bears despite lacking a bullish bias of late.

Talking about the latest Fed talks, Federal Reserve Governor Lisa Cook cited a slew of global risks comprising persistent inflationary pressures and further economic slowdown in China. On the other hand, Federal Reserve Bank of Philadelphia President Patrick Harker sounded hawkish while saying that the Federal Open Market Committee (FOMC) will stay higher for longer, with no sign of near-term rate cuts.

In the case of the geopolitical, the news suggesting more geopolitical woes about the US-Iran ties weighed on the sentiment and put a floor under the US Dollar. That said, the Pentagon formally announced that the US military strikes are targeting Iran-backed terrorists in eastern Syria.

Furthermore, China's woes escalate and roil the sentiment, as well as exert downside pressure on the Gold price. That said, the People’s Bank of China (PBoC) said that the economy faces challenges from slowing economic drivers including property, infrastructure and export. Earlier in the day, China’s headline inflation numbers for October confirmed the market’s fears about the world’s second-largest economy’s recovery by posting softer figures. That said, the headline Consumer Price Index (CPI) dropped with -0.2% YoY figures versus 0.0% prior and -0.1% expected while the Producer Price Index (PPI) slipped to -2.6% YoY from -2.5% previous readings, versus -2.7% market forecasts.

Apart from the hawkish Fed and China woes, the mostly downbeat concerns about the Eurozone and the UK also allowed the US Dollar to edge higher.

On Wednesday, Germany’s inflation per the Harmonized Index of Consumer Prices (HICP) and the Consumer Price Index (CPI) gauges confirmed the initial readings of 3.0% and 3.8% respectively for October. Further, the Eurozone Retail Sales growth eased to -2.9% YoY for September versus -1.8% prior (revised) and -3.2% market forecasts. Following the data, European Central Bank’s (ECB) Chief Economic Philip Lane said that the underlying inflation progress is not enough while the ECB policymaker Gabriel Makhlouf stated that early signals of the impact of inflation and monetary tightening on borrower resilience are becoming visible. On the same line, the ECB Governing Council member Martins Kazaks also mentioned that (they) won’t keep interest rates elevated a minute longer than necessary. However, ECB Official Joachim Nagel dismissed the rate-cut talk while calling inflation the 'greedy beast'.

On the same line, Bank of England (BoE) Governor Andrew Bailey portrayed the economic benefits of openness and the risks posed by fragmentation for the world economy, as well as the financial stability, on Wednesday. Further, UK Economic Secretary to the Treasury Andrew Griffith said that the British economy is not in a recession now.

Elsewhere, Bank of Japan (BoJ) Governor Kazuo Ueda said, “We will maintain negative rate, YCC framework until the sustained achievement of 2% inflation comes into sight.”

With this, the market’s overall view appears mostly dicey and hence the traders are likely to stick to the traditional havens, preferably to the US Dollar.

• Strong buy: USDCAD
• Strong sell: ETHUSD, GBPUSD, Gold
• Buy: USD Index, Nasdaq, USDJPY
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

Central bankers in focus

With no major data/events in the line, speeches from Fed Chair Jerome Powell and ECB President Christine Lagarde will be in the spotlight. Additionally, the weekly US Jobless Claims and the geopolitical updates will also be important for the traders to watch for clear directions. That said, Powell is likely to defend hawkish moves while Lagarde doesn’t have more economic back-up to confirm the same and hence the US Dollar is likely to edge higher while the Gold price may witness further downside.

May the trading luck be with you!