The XAUUSD saw upward momentum fueled by heightened demand from China and central banks amidst de-dollarization efforts and expectations of policy easing. However, concerns emerged with significant outflows from gold ETFs, amounting to $7.7 billion from January to mid-March, while Bitcoin ETFs attracted $10.6 billion during the same period, sparking speculation of cryptocurrency siphoning.
Recent developments have shifted this narrative, with gold ETF reserves on the rise while Bitcoin ETFs experience outflows. Does this signal a resurgence in demand for the precious metal? The correlation between gold and US treasuries becomes evident as rising treasury yields tend to overshadow gold's appeal due to its lack of interest yield. However, during periods of Fed policy easing, treasury rates typically decline, creating favorable conditions for gold, especially amidst synchronized global monetary expansions.
Rate cuts by major central banks undermine fiat currencies' purchasing power, prompting investors to seek refuge in gold. Conversely, the strengthening of the US dollar, fueled by synchronized monetary policies, poses challenges for gold. Despite the Fed's "hawkish" rhetoric, driven by data indicating a temporary halt in disinflationary trends in the US economy, uncertainties remain regarding the FOMC's outlook for the fed funds rate.
In light of these dynamics, gold faces risks of relinquishing its recent gains amidst USD strength and shifting Fed sentiments. However, the asset's ability to maintain support levels at $2,159 and $2,148 per ounce will dictate its short-term trajectory, with potential consolidation in the $2,150-$2,200 range.
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