December gold futures rose $33 on Thursday to hit a daily high of $1,812. At the time of writing, prices were at $1,808.20 an ounce.
Taiwan is at the center of the latest round of geopolitical tensions between the US and China. On Thursday, markets were rattled by China firing several ballistic missiles around Taiwan in retaliation for a visit by US House Speaker Nancy Pelosi. China is also conducting aggressive military maneuvers.
“The aggressive tone coming from Beijing in response to Pelosi’s visit to Taiwan has created a classic safe play in recent sessions, with gold and bonds rising alongside the US dollar and Japanese yen,” Han Tan said. , market leader. analyst at Exinity Group.
This situation will continue to play out into the weekend, according to Marc Chandler, chief market strategist at Bannockburn Global Forex.
“China continues its military harassment of Taiwan while US President Biden pushes against a Senate bill that would recognize Taiwan as a ‘major non-NATO ally’ and strengthen its representation in international forums,” Chandler said.
To read more about geopolitical tensions and their impact on gold, click here.
This was an encouraging rally for gold after a stronger US dollar caused a decline to $1,700 an ounce in July. Technically, a close above $1,789 would be a solid sign of more gains ahead, according to TD Securities strategists. “We estimate that a price close above $1,789/oz will catalyze quite a momentum shift,” they said on Thursday.
However, the big hurdle is Friday’s July US jobs report. the generals were added.
Economists’ consensus calls look for the economy to have added 250,000 new jobs in July after creating 372,000 in June.
Hawkish Fed speakers also helped boost gold prices this week, pushing against the idea of the US central bank turning away from rate hikes.
“One after the other, they have stuck with the established script. What we are seeing is a concerted and well-crafted communication effort by the Fed. It is intended to leave no doubt as to the Fed’s intention to keep rates hiking until inflation is falling, regardless of the cost to growth and employment,” said Win Thin, head of BBH Global Currency Strategy.
Of the latest comments, Chicago Fed President Charles Evans said the U.S. central bank will likely continue to use outsize rate hikes until it sees inflation coming down. “If you really thought things weren’t getting better … 50 (basis points) is a reasonable estimate, but 75 could also be OK. I doubt it would need more,” he told reporters on Tuesday.
San Francisco Fed President Mary Daly also said inflation remains a problem. The Fed has “a long way to go” before it achieves its price stability goals, Daily said during a LinkedIn interview. “We are still determined and completely united,” he said.
St. Louis Federal Reserve Bank President James Bullard noted, “we still have some ways to go here to get to tight monetary policy.”
Additionally, Richmond Federal Reserve President Thomas Barkin admitted that the Fed is willing to pay the price to control inflation. “There is a way to get inflation under control. But a recession can happen in the process. If it does, we have to keep it in perspective: nobody canceled the business cycle,” he said.
What’s next for gold?
Gold is looking to resume its rally after peaking above $2,000 an ounce in March, according to a growing number of analysts.
“Gold looks more likely to resume its sustained uptrend and break through resistance around $2,000 an ounce against support below $1,700,” said Mike McGlone, senior commodities analyst at Bloomberg Intelligence. “The most aggressive Fed tightening in 2022 since the 1980s has contained gold, and it is only a matter of time before interest rate hikes wind down, leaving the metal to continue its path of least resistance to the upside.”
CNBC’s Jim Cramer also updated his outlook on gold this week, saying now is the perfect time to get into the gold trade after what he described as a “strange period” for precious metals.
Cramer cited the chart analysis of legendary market technician Larry Williams: “Williams finds that when small traders get very bullish, it’s almost always a sign that we’re near the top. But when they get very bearish, it’s almost always a sign that we bottomed out,” explained Cramer. “According to the latest Commitment of Traders report, small speculators have a net 92,690 contracts in gold, which is their smallest long position since May 2019, just before we got a major boost in gold. gold”.
Cramer’s own view is not to bet against Williams when it comes to spotting the bottom in gold. “The charts suggest that gold could be ready for a rally, and it might be the perfect time to do some buying,” he reiterated.
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