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Revisiting $1,900/oz As Powell Puts Away 75bp Hike For Now

GOLD

Gold deals ~$19/oz higher at typing to print ~$1,900/oz, on track for a third consecutive higher daily close with tailwinds from Fed Chair Powell’s presser on Thursday evident.

  • To elaborate, the precious metal builds on a ~$13/oz higher close on Wednesday after Powell said that a 75bp hike was “not something that the committee is actively considering” for the next few meetings, with the overall move higher facilitated by broad declines in U.S. real yields and the USD (DXY).
  • Support for gold from a steady beat of negative economic data surprises (keeping in mind well-documented debate re: stagflation) continues to take a back seat to worry re: >50bp rate hikes for now, with little reaction observed in the yellow metal on downside surprises in ADP employment data and the ISM’s service sector index on Wednesday (while noting that U.S. PMI data came in ahead of BBG median expectations).
  • A cumulative ~100bp in hikes is now priced into July FOMC dated OIS, implying expectations for back-to-back 50bp hikes in both the June and July meetings. OIS markets now show expectations for around 3 x 50bp hikes across the five remaining FOMC meetings for the year, with a cumulative ~195bp of tightening now priced in through calendar ‘22.
  • From a technical perspective, bullion has broken resistance at $1,900/oz (May 2 high), exposing further resistance at its 20-Day EMA (around $1,917.3/oz) and at $1,958.4/oz (Apr 20 high). On the other hand, support is situated at $1,850.5/oz (May 3 low).
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Gold deals ~$19/oz higher at typing to print ~$1,900/oz, on track for a third consecutive higher daily close with tailwinds from Fed Chair Powell’s presser on Thursday evident.

  • To elaborate, the precious metal builds on a ~$13/oz higher close on Wednesday after Powell said that a 75bp hike was “not something that the committee is actively considering” for the next few meetings, with the overall move higher facilitated by broad declines in U.S. real yields and the USD (DXY).
  • Support for gold from a steady beat of negative economic data surprises (keeping in mind well-documented debate re: stagflation) continues to take a back seat to worry re: >50bp rate hikes for now, with little reaction observed in the yellow metal on downside surprises in ADP employment data and the ISM’s service sector index on Wednesday (while noting that U.S. PMI data came in ahead of BBG median expectations).
  • A cumulative ~100bp in hikes is now priced into July FOMC dated OIS, implying expectations for back-to-back 50bp hikes in both the June and July meetings. OIS markets now show expectations for around 3 x 50bp hikes across the five remaining FOMC meetings for the year, with a cumulative ~195bp of tightening now priced in through calendar ‘22.
  • From a technical perspective, bullion has broken resistance at $1,900/oz (May 2 high), exposing further resistance at its 20-Day EMA (around $1,917.3/oz) and at $1,958.4/oz (Apr 20 high). On the other hand, support is situated at $1,850.5/oz (May 3 low).