Markets, which were rocked by the unexpected banking crisis in March, have been trying to rebalance since the beginning of this week. However, two things are pressuring the markets: one is the interest rate hike by central banks, and the other is the banking crisis that could flare up again at any moment.
Central banks held their meetings this month in the aftermath of the banking crisis and said they saw the situation as manageable and continued to raise interest rates. This is because inflation started to rise again last month in USA, Region, England, Switzerland and many other countries. Although rents play a major role in increasing inflation, there was a noticeable increase in food prices last month, despite the drop in global prices.
According to the latest February report by the Food and Agriculture Organization (FAO), food prices, which rose to a record high in March 2022 due to the impact of the war, have been declining for 11 consecutive months since April. However, we witnessed a significant rise in the price of sugar in February. Sugar prices increased by 6.9% in one month. On the other hand, the rise in sugar prices caused a rise in the prices of packaged products, especially beverages that are included in foods. March data will be released on April 7.
PCE data to be released in the US on Friday will show the distribution of consumer spending in more regions than the CPI basket. The increase in the numbers may increase the perception that inflation is still alive in March.
what does that mean?
The increase in the numbers may raise expectations that the Federal Reserve may raise interest rates by 25 basis points in May as well. At the same time, it could mean that the waiting period before a cut could be a long time since the last rate hike, which is seen as June at the moment. Indirectly, the probability of an expected interest rate cut for this year may decrease.
Continued high interest rates and a long waiting period mean that concern of a recession in the economy is also growing.
In a worst-case scenario, a deepening banking crisis could shorten the wait for the Fed to start cutting interest rates, but it also means more damage to the economy. So the worst for the markets right now is the possibility of a crisis. The further away markets are from that possibility, the greater the odds of a return to inflationary interest rates.
Today I would like to point out something about the change below.
If we recall, the ounce of gold fell too far, dropping from 1,960 to 1,805 USD when the probability of a 50 basis point hike increased. The reason for the rise in March was to compensate for the previous loss. The other situation was, of course, the safe haven feature.
Now with the market relaxing that I mentioned after trying to test the $2,000 level, the price of an ounce is trading near $1,950. The lower the concern, the less bullish momentum for gold. If crisis pricing is replaced by the inflation-interest rate cycle that I mentioned again, and if the data creates an expectation of rising inflation, gold could drop to $1,876. However, it cannot be said that this level is low.
Looking at the longer-term chart, the $1,876 level is a very strong level. The 14-week moving average is also above this level. In fact, the fact that the 52-week moving average is above 1,800 confirms that he is looking for an excuse to accelerate gold’s rise.
Looking at the change in the near term, the 50-day moving average is still above $1,876. The 200-day moving average is at $1,780, which is the point where gold will consider direction. Therefore, the short and medium term outlook is positive for gold.
In the short term, the important resistance at $1,876 and above this level, especially above $1,980, could allow new levels to be seen. On the downside, below the $1,876 level, the $1,780 level will be important. Once again, a drop towards $1780 but protecting this area is positive.
The $1,780 level is an important level in the medium term. However, when we look at the chart, we clearly notice that the $1,618 level, which was tested but protected in the post-peak decline, is the main critical point.
For investors who trade daily and weekly, the gap between the levels you mentioned can be seen as very high. In short-term transactions, the areas you have defined as above and below 1,876 can be followed.
On the slightly longer term, when we monitor the highs and lows that were seen after touching the record level of 2,074, there is a descending channel that is not very reliable yet, but it has started to form timidly from a technical point of view. But the price is high enough to bypass this channel, so that can reduce its reliability.
