Gold's Market Performance
Gold experienced a notable shift in market sentiment, forming a daily dark-cloud cover pattern which erased most of Tuesday’s gains. This pattern marked the recent two-day low-liquidity rally as a dead-cat bounce, indicating a potential pause or reversal in the downtrend. Despite this, the reward-to-risk ratio for bearish positions appears unfavourable at current prices, with gold hovering just above Friday’s low. A similar bearish pattern emerged in the copper market, while silver found support beneath its record high. Given that US futures held above key support levels, it's plausible that gold might sustain its position above last week’s low, at least in the short term.
Upcoming Economic Data
Today's market activity will be significantly influenced by the release of GDP and unemployment data during the New York session. These reports are expected to fuel gold's momentum, providing critical insights into the economic landscape and potential market direction.
Federal Reserve Insights
Federal Reserve Bank of Atlanta President Raphael Bostic made several statements regarding inflation and the job market. He acknowledged that the path to 2% inflation is not assured and that the inflation trajectory will be bumpy. However, he noted a general downward trend in inflation. Bostic also highlighted that the job market remains tight, though not as tight as it was in February 2020, suggesting some easing in labor market conditions. He mentioned that a broader reduction in price gains would increase confidence in potential interest rate cuts.
US Dollar Resurgence
The US dollar has finally shown the strength that market participants have been anticipating, reclaiming its position as the strongest forex major on Wednesday. The USD found solid support from the December low, holding firm on its third retest, and a bullish hammer pattern emerged. Wednesday's trade opened near the day's low and closed near its high, with the highest trading volume in nine days and the strongest daily performance in a month. The daily close above the 105 level solidified the dollar’s position, earning it a spot on many traders' 'buy the dip' watchlists.
Impact on Treasuries and Wall Street
Weak demand for US 7-year treasuries contributed to a decline in Wall Street indices on Wednesday. Concerns over the US deficit and the potential for increased yields, alongside expectations of ‘higher for longer’ Fed rates, led to a steeper US yield curve. This environment bolstered the USD, which enjoyed its strongest daily performance in over a month.
Summary