Gold Under Pressure ahead of Powell’s Senate Hearing

Gold Fundamental Analysis
  • XAU/USD is falling as speculators position themselves before Federal Reserve Chairman Jerome Powell’s critical appearance.
  • US factory orders decline as the market for civilian aircraft collapses.
  • Traders are hoping for new comments from Powell on the economy’s outlook and monetary policy.

Gold Fundamental Analysis

XAU/USD is trading at $1,839.24, down by 0.41% in 24 hours. Gold investors anticipate additional information on the Fed’s inflation outlook and monetary policy stance from Powell’s speech.

US Economic data

The US economy gives favourable investor sentiment despite increasing inflation and a tight labour market. Meanwhile, the factory sector’s weaknesses continue to raise questions.

A recent report claims that, in contrast to the expert projection of -1.8%, factory orders in the United States declined by 1.6% in January. Factory orders climbed by 1.2% when excluding transportation. A decline in commercial aircraft bookings contributed to a reduction in new orders for January’s American-made goods. However, the surge in orders for machinery and a number of other products offered hope that the manufacturing industry could be on the rebound.

Moreover, on the fundamental front, on Friday, March 10, nonfarm payrolls (NFP) employment numbers for February will be of interest, which would significantly impact the US Dollar Index (DXY).

In contrast to the 517,000 jobs gained in January, analysts predict the addition of 200,000 new employment last month. However, if the forecast is miscalculated, it will support the idea that January’s high number was a one-time event.

The US market will turn out to be better than expected, which might lead to greater financial market values as it would reduce the likelihood of a recession. Therefore, the upcoming NFP should be pivotal in determining the direction of the gold.

US-China conflict caped Gold’s losses

In his first media interview as foreign minister, held on Tuesday, China’s foreign minister warns of the potential for conflict with the US and praises Russia connections.

China’s new foreign minister defended his country’s increasing ties with Russia. He warned that the US and China are headed for an unavoidable clash if Washington does not modify its strategy.

Fears of new US-China conflicts, with Beijing’s condemnation of Washington’s cold military strategy, join dovish expectations for Fed Chair Powell to probe the market’s sentiment.

Upcoming US Senate hearing will keep Gold Prices Volatile

Today’s primary event in the US session is a Senate hearing where Fed Chairman Jerome Powell will speak. The markets are eager to see whether Powell has reconsidered his views about his disinflationary comments from February.

Investors are awaiting Powell’s speech because it might affect how the US central bank behaves. Rumours are already floating in the market about a possible 50 basis point rate rise, which would be significantly higher than the last increase of 25 basis points.

Furthermore, Gold market participants will monitor Powell’s speech for any cues that he would deviate from his anti-inflationary strategy and assert that policy tightening needs to be renewed or stick to his anti-inflationary plan.

Meanwhile, ahead of Powell’s speech, the dollar index, which compares the dollar to six key counterparts, rose by 0.21% to 104.57. The benchmark 10-year Treasury note yields decreased by 0.98% on the day to 3.944%.

Going forward, dovish hopes from Fed Chair Powell keep the optimists on the board, but unexpectedly hawkish statements might swiftly sour the market sentiment and bring back the US Dollar bulls, which could pressure the Gold prices.

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