Gold - better levels for longs await
Gold is in beast mode - we eye the 2022 and ATHs at $2070 and $2075 respectively and scalper aside it's hard to bet against the momentum play right now
The USD is finding few friends and the ST bear trend is a massive tailwind for gold. We've seen US yield curves looking like they will resume bull steepening and rate cuts are once again being priced into OIS and fed fund futures - gold is not a hedge against inflation per se, but the symptoms of high inflation and tighter policy - i.e weaker growth and possible recession, which will likely require rate cuts to take policy back to neutral - and, of course, continued instability in US financials ahead of Q1 bank earnings on 14 April.
Using a simple rates model as our guide for gold, we can see gold (inverted) has held a strong relationship with the level of cuts priced - I've used the difference between Dec fed funds and May (the peak pricing) - this simplistic model suggests, that in the short-term, gold may be a touch rich and we may see some heat coming out of the move before the buyers step in and we take another leg higher.
Fundamentally it seems bad news equals bad news for the USD, and promotes a higher degree of rate cuts and subsequently gold upside
Its all on Friday's NFP then - a reading <200k jobs and a weaker AHEs could see gold pushing to its ATHs
The USD is finding few friends and the ST bear trend is a massive tailwind for gold. We've seen US yield curves looking like they will resume bull steepening and rate cuts are once again being priced into OIS and fed fund futures - gold is not a hedge against inflation per se, but the symptoms of high inflation and tighter policy - i.e weaker growth and possible recession, which will likely require rate cuts to take policy back to neutral - and, of course, continued instability in US financials ahead of Q1 bank earnings on 14 April.
Using a simple rates model as our guide for gold, we can see gold (inverted) has held a strong relationship with the level of cuts priced - I've used the difference between Dec fed funds and May (the peak pricing) - this simplistic model suggests, that in the short-term, gold may be a touch rich and we may see some heat coming out of the move before the buyers step in and we take another leg higher.
Fundamentally it seems bad news equals bad news for the USD, and promotes a higher degree of rate cuts and subsequently gold upside
Its all on Friday's NFP then - a reading <200k jobs and a weaker AHEs could see gold pushing to its ATHs
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