Firmer In Asia

Gold sits ~$6/oz firmer at typing to print ~$1,771/oz, a shade below session highs, but extending a move away from six-month lows made on Tuesday (at ~$1,764/oz).

• To recap, the precious metal shed ~$40/oz around Tuesday’s NY session open after keeping above $1,800/oz for much of the Asian session, ultimately closing ~$45/oz lower on the day. The move lower was facilitated by a broad recovery across U.S. real yields and a rally in the USD, with the DXY hitting levels not witnessed since Dec ‘02 (above 106.00) on the back of growth fears in Europe, supporting a diverging policy outlook.
• July FOMC dated OIS now price in ~70bp of tightening for that meeting while a cumulative ~168bp is now priced in through calendar ‘22. The latter has continued to edge lower, reflecting ongoing debate re: less aggressive rate hikes amidst economic growth risks, with BBG Economics forecasting odds for a recession in the U.S. in ‘23 at 38%.
• A note that Fedspeak across the past month has pointed to a Fed prepared to weather hits to economic growth to fight inflation, with Fed Chair Powell last week saying that the process is “highly likely to involve some pain”.
• From a technical perspective, conditions remain bearish for gold. Key support at $1,780.4/oz (Jan 28 low) has been broken, exposing support at $1,753.1/oz (Dec 15 ‘21 low), while a break of that level will bring further support at $1,721.7/oz (Sep 29 ‘21 low) into focus.