Market Analysis

Gold Prices Expected to Decline Amid Fed Rate Concerns

Dupoin · 30 May 2024103.5K Views

XAUUSD

Prediction: Decrease

Fundamental Analysis:

Gold prices have dropped to $2,340 as concerns grow that the Federal Reserve will maintain higher interest rates for an extended period. The US Dollar and bond yields are rising as traders scale back expectations of a Fed rate cut in September. Attention is now on the US core PCE price index data, due on Friday, for further insights. Anticipated growth in underlying inflation would increase the likelihood of sustained high interest rates, negatively impacting gold prices. Higher interest rates raise the opportunity cost of holding non-yielding assets like gold, favoring yields on interest-bearing assets and the US Dollar.

Technical Analysis:

The short-term outlook for gold is uncertain, with prices falling below the 50-period Exponential Moving Average (EMA), currently around $2,350. The 14-period Relative Strength Index (RSI) has moved into the bearish range of 20.00-40.00, indicating established bearish momentum. A break below the May 24 low of approximately $2,320 could lead to further declines. Conversely, a move above the May 28 high of around $2,365 would shift control back to the bulls.

USDJPY

Prediction: Increase

Fundamental Analysis:

The dollar surged to a two-week high against major currencies on Thursday. This rise was driven by a sell-off in Treasuries, which increased the appeal of the dollar due to higher U.S. yields and a flight to safe haven assets. The dollar climbed to a two-week peak against the euro and continued its recovery from a more than two-month low against the pound. This followed a 15-basis point rise over two days, pushing long-term Treasury yields above 4.6%, fueled by strong U.S. economic data and poorly received bond auctions.

The sell-off in the bond market has unnerved investors, leading to a sharp decline in global equities and a subsequent rush to the safest assets.

Technical Analysis:

USD/JPY has been gradually recovering since hitting the $160 level. However, there have been no clear signs of a good entry point or technical indicators to predict future price movements. It is advisable to stay on the sidelines for now and wait for more definitive actions.

BTCUSD

Prediction: Increase

Fundamental Analysis:

Long-term holders (LTHs), as defined by Glassnode, are wallets holding Bitcoin for over 155 days. These investors exhibit investment maturity, contributing to the market's resilience. Despite Bitcoin's price being around $67,722—down 3.5% over the past week but up 0.6% in the last 24 hours—these holders are not in a rush to sell. Glassnode's report emphasizes that LTHs have not yet reached the selling point that typically signals a market downturn. The market value to realized value (MVRV) ratio, a reliable metric for assessing the profitability of long-held Bitcoins, suggests that many LTHs are sitting on significant unrealized gains. Historically, LTHs begin to sell when this ratio hits certain highs, which has not yet occurred despite the recent price peak.

Technical Analysis:

Bitcoin has been on an upward trend, attempting to reach its all-time high (ATH) of around $73,000. However, it failed to do so last week. We should closely monitor the price movements to determine its direction. If the price breaks through $73,000, we can anticipate it reaching around $100,000.

HSI

Prediction: Increase

Fundamental Analysis:

The Hong Kong stock market has experienced declines for consecutive trading days, losing more than 350 points or 1.9% in total. The Hang Seng Index currently stands just above the 18,475-point level and is expected to open lower again on Thursday.

The outlook for Asian markets is negative due to concerns over treasury yields and interest rates. Both European and U.S. markets have declined, and Asian markets are anticipated to follow this trend.

On Wednesday, the Hang Seng saw a sharp decline with broad-based losses, particularly affecting financials, property, and technology stocks.

Technical Analysis:

The Hang Seng Index has retraced some of its previous gains from the major rally. We can identify previous resistance levels now acting as support, providing potential entry points. If the price moves towards 18,000, it may present a favorable opportunity for a long position to the upside.

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