Wed, December 07, 2022

The Federal Reserve Chance of Rate Cut Drops Gold Price

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In the previous week, the stronger-than-expected U.S. non-farm payroll data diminished the hopes of an urgent interest rate cut by the Federal Reserve. As a result, gold prices experienced a sudden fall.

In addition to that, the precious metal declined below $1,400 an ounce. And its prices last week dived from its high of $1,440 to a range of $1,380 to $1,385 before finishing at $1,400.

And there have been escalating expectations that the Federal Reserve will cut interest rates by 25 basis point in July. But after the U.S. economy reported an additional 224,00 new jobs in June, the expectation of a rate cut disappeared. Aside from that, the stronger-than-expected data gave a not-so-good impact on the prices of gold.

For this week’s biggest event, the Federal Reserve Chairman Jerome Powell will have a testimony in the presence of Congress on July 10 and 11. Also, the market is rummaging for hints as to the timing and pace of the next interest rate cut.

Then going back to the gold, the MCX Gold displayed a massive spike on the upside to Rs 35,100 per 10 grams. And this follows the 25 percent growth in import duty from 10 percent to 12.5 percent. After that, gold prices in the domestic market somehow managed to end at Rs 34,600.

Elsewhere, LBMA gold spot slipped to as low as $1,410. Also, it broke the trendline support, which can maintain the trend in sell-on-rallies-mode. On the other hand, $1,380 is the support needed to look out for.

Also, the strategy for MCX Crude July 2019 contract is in the scope of Rs 34,650 to Rs 34,70o with a stop loss of Rs 34,850 and a target price of Rs 34,300.

Oil Prices

Meanwhile, the price of oil slipped on July 9 on demand concerns after the current hints that the U.S.-China trade dispute is affecting the global economy. But the potential for conflicts in the Middle East gave support.

Also, Brent crude futures dipped 0.2% or 14 cents. And it is trading at $63.97 per barrel. On July 8, it fell about 12 cents.

Aside from that, the U.S. West Texas Intermediate crude futures fell by 0.4% or 20 cents, at $57.46. And in the previous session, it increased by 15 cents.

The U.S.-China trade war is pressuring oil prices with worries about demand. The dispute between the two countries, which is heading to its send year, discourage prospects for economic growth. For that reason, the oil demand is also affected because the two countries are the largest oil consumers in the world.

On the data displayed last July 8, the core machinery orders of Japan plunged by the most in eight months. The fall was due to the sign the global trade tensions might take its toll on corporate investment.

Then on July 9, the Japanese government figures revealed that the real wages in the country dropped for a fifth consecutive month. Adding to that, Japan is the fourth-largest user of crude oil in the world.

Furthermore, hedge funds sold more Brent futures and options in the previous week. At the same time, the concerns on the global economy trumped the decision of the OPEC (Organization of the Petroleum Exporting Countries) and its associates to extend output cuts.


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