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The Most Unpredictable Commodity Right Now: XAU/USD (Gold), here is WHY?; May 03, 2022

The Most Unpredictable Commodity Right Now: XAU/USD (Gold), here is WHY?

For many years, gold has been considered as one of the Safe Haven Asset because it has historically maintained its value over time and serves as a “security” against unfavorable economic events. Currently the worldwide countries are facing the issue of highest ever inflation, and gold is also considered a good hedge against the risk of inflation because the rising cost of goods and services tends to erode the value of the U.S. dollar.

But now the time has changed as Gold is rejecting its usual drivers and is focusing solely on the U.S. dollar. Let’s not forget the DXY index. DXY hit highest level since Dec 2002 at 103.92 marks. In addition, the yield on the 10-year U.S. Treasury note is presently fetching 3.01%–the highest since Dec 2018. The combination of dollar strength, as well as sharply higher yields on U.S. notes and bonds collectively, put major pressure on gold.

Traders eye most watchful event of the week and that is U.S. FOMC Interest Rate decision and Monetary Policy Statement due tomorrow. The CME’s FedWatch tool indicates that there is a 98.7% probability that the Federal Reserve will raise the Fed funds rate by ½ a percent. This interest rate probability indicator is also predicting another strong rate hike during the June FOMC meeting. It predicts that there is an 86% probability that the Fed funds rate will move to between 1 ½% – 1 ¾% in June.

Let’s watch out carefully what U.S. FOMC brings out for the investors and gold too.

Technical View:

XAU/USD:

  • Gold spiked down sharply in previous session and touched $1,854 mark in previous session.
  • Today pair made intraday high at $1,867 and low at $1,859 mark.
  • A day chart and H1 chart with triple EMA suggest bearish trend for the time being.
  • A sustained close above $1,876 on H1 chart requires for the upside rally.
  • Alternatively, a consistent close below $1,854 on H1 chart will test further supports.
Supports
Resistances
$1,854
$1,872
$1,848
$1,876
$1,842
$1,882
$1,837
$1,889
$1,831
$1,894

 
Take a look and do trade wisely!
Good Luck

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