ALB Limited 09.05.2023

Investors of gold focuses on inflation rates

As the Federal Reserve approaches the end of one of its toughest interest rate hike cycles in history, the real economy has not yet shown any significant signs of slowing down. In fact, the US labor market data released last Friday indicates that employment remains strong.

The imbalance between supply and demand in the labor market continues to exert upward pressure on average hourly earnings. The latest monthly and annual data confirm our view. Given that wages are a parameter closely monitored by the Fed in terms of inflation dynamics, these developments are significant. Although the policy rate has reached its ceiling, as Powell noted in his press conference last Wednesday, the duration of this level will depend on incoming macroeconomic data.

Tomorrow's release of US consumer inflation data will offer a clue to gold investors in this regard. Despite the retreat in bond yields in the new trading day, spot gold held onto support at $2,022. We see support for gold prices from the traditional debt ceiling impasse in the US Congress and the banking sector's confidence crisis. Following a recession signal, a signal of monetary easing from the Fed is needed for the beginning of a record series in the gold market, testing the $2,070 resistance three times since August. Although we believe that speculating on a Fed rate cut at this point would be an aggressive stance, the Fed will eventually have to withdraw. This also supports our positive view on gold. A certain range of movement can be expected to continue until the consumer inflation data is released tomorrow. Technically, we are monitoring the levels of $2,040 and $2,070 as short-term resistance points, and the $2,000 level may be considered a buying opportunity in the event of any pullbacks.

Tags: Gold, Analysis

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