quick gold wrap ahead of fomc
1 may 2024
Rhona O'Connell
Gold staging a much-needed retreat as markets see rate cuts moving further over the horizon. Yesterday's Employment Cost Index (ECI) was key; Powell’s primary focus is the need for a softening in the labour market and an ECI of 1.2% vs a market call of 0.9% will dampen any hopes of a softening market for now. Physical markets in the west still weak, while strong in the Far East, but slowing slightly there also. World Gold Council's "Gold Demand Trends" was released yesterday and records, inter alia, 290t of net central bank buying in the quarter. Not a record, but a lot stronger than most of us were expecting (the quarterly record was 498t in Q3 2022 followed by 356t in Q3 2023). Quarterly average over 2022 and 2023, 265tpq. For context, world mine production is ~3,700tpa.
Gold now sitting exactly at the first Fibonacci retracement level of $2,289 and also at the bottom of the Bollinger range, so technically oversold. Ten-day MA at $2,336 and below the 20 at $2,342. 50D at $2,214. Market will look for nuances in Jay Powell's Q&A post-presser but with the way the swaps are aligned it's doubtful that he could say much that would pressure gold further. Geopolitics still a major influence.
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