Forex Analysis & Reviews: 30.03.2023 - Gold could return to recent...

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30.03.2023 11:19 PM

Gold could return to recent highs

Gold prices were down on the charts during Thursday's Asian session, but it eventually increased.

Gold futures trading on the COMEX division of the NYMEX fell to $1983 or 0.07% lower than the previous trading day at 15:03 London time. However by 6 p.m. the precious metal eventually rose to $1999.

Gold prices are rising because the U.S. dollar is getting weaker. Obviously, investors were waiting for economic data, which could shed light on the U.S. Federal Reserve's further actions on interest rates. So reports on GDP and the U.S. labor market turned out to be far from optimistic, which was reflected in the dollar's values.

The U.S. Dollar Index, which is a relative measure of the USD strength against a basket of six major currencies, had lost 0.46% at the time of this writing and was at 102.17. Any loss in the value of the dollar makes gold, which is denominated in U.S. currency, more accessible to holders of other currencies. Accordingly, when the dollar falls in price there are more people willing to buy the precious metal, and when the demand increases, the value of the asset rises.

As for macro data, the U.S. Department of Commerce slightly downgraded the estimate of the fourth quarter GDP growth to 2.6% annual pace, the second estimate was 2.7% and the first was 2.9%. Q3 GDP growth was 3.2% on a year-over-year basis.

The labor market data also turned out to be worse than expected. Jobless claims for the week ended March 25 totaled 198,000, up 7,000 from the previous period.

Amid such weak macro data, traders continue to estimate the prospects of the Federal Reserve's monetary policy. According to the CME Group, half of the experts expect the key rate to remain unchanged in May, at 4.75-5%. The rest are assuming another 25 bps rate hike. Be that as it may, U.S. inflation is still well above the 2% level that the central bank is aiming for.

As of today, traders are still anxious about the news that deposits and loans from bankrupt Silicon Valley Bank are being taken over by U.S. First Citizens Bank. During times of negative developments and persistent market fears, gold traditionally wins in demand, as it is widely recognized as a safe haven asset that investors flee to during "storms".

Given these factors, it is clear that the outlook for gold prices remains very favorable, so it cannot be ruled out that quotes may well return to the recently reached highs.

The growth of gold prices is limited only by the soaring European stock indices, which suddenly rose to 2-week highs.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.