Market Drivers – US Session 21/12/2022

Mohamed Abdelhamid 22 December, 2022 4:25 am Commodities, Forex Market, Market Update

Gold price could be best teller of market drivers’ story on Wednesday. Gold price remains on its direct way to snap two-week uptrend. The US data reinforce the dollar’s recovery but firmer sentiment is sufficient to keep gold buyers hopeful.

Economic Data

On Wednesday, US Conference Board’s Consumer Confidence jumped to the highest levels in eight months with the latest print of 108.3 for December, compared to the market forecasts of 101.0 and the revised prior readings of 101.40.

Softer reading of the US Existing Home Sales for November, 4.09M MoM compared to 4.2M expected and 4.43M prior, challenged the dollar afterward.

Following that, the US Dollar Index (DXY) printed the first daily gain in three even as it retreated to 104.22 by the end of Wednesday. Given the US Dollar’s inverse relations with Gold, the firmer Dollar Index impacted gold price.

US Gross Domestic Product is expected to confirm initial forecasts for Q3, suggesting further uptrend for the Gold Index, meanwhile, the several news headlines on developments linked to Russia and China are widely eyed by traders and investors for obvious directions.

Key Developments

During the US trading session, Germany’s finance ministry expects activity in Europe’s biggest economy to remain subdued during the fourth quarter of this year and first quarter of next and sees declining inflation rates during 2023, it said in its monthly report per Reuters.

Along with the firmer data, challenges to the sentiment, originating from Russia and China, also seem to probe the gold price. Ukraine’s Volodymyr Zelensky is visiting Washington. US President Joe Biden said that the United States shares the same vision of a “free, independent, prosperous and secure Ukraine”. On the other hand, Russian President Vladimir Putin announced he would increase the country’s military potential.

Doubts about China’s Covid conditions also challenge the Gold Index, but, the China’s actual preparedness for more lockdowns is a negative factor for gold. Gold prices suffered as the US dollar strengthened and US Treasury yields rose. In addition, continuous Covid lockdowns in China hindered demand for jewellery from one of the world’s largest consumers of precious metals.

In light of the latest challenges facing gold price, largely due to the firmer US data and risk-negative headlines, the United States Gross Domestic Product for the third quarter and Core Personal Consumption Expenditure will be crucial for immediate price action and directions.

Russia-Ukraine developments got less attention during the previous weeks, which in turn suggests no major negatives for gold despite the latest negative headlines surrounding the geopolitical issues. Further, China’s readiness for more stimulus and opening of the economy could replace the Covid concerns and can favour the Gold Index.

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