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Title: Gold Price Forecast: XAU/USD climbs above $1,950 as investors anticipate only one interest rate hike by Fed

June 20, 2023 02:33 AM ET

By: AnalysisWatch

The gold price (XAU/USD) saw decent buying interest around $1,947.50 during the London session. The precious metal climbed above the key resistance level of $1,950.00 as investors expect only one more interest rate hike from the Federal Reserve (Fed) this year.

Futures on the S&P500 index extended their journey lower as investors have an excuse in the form of a long weekend in the United States due to the Juneteenth holiday. Investors' ability to take risk has declined and the attractiveness of risk-taking assets has diminished.

Economists at HSBC believe that investors should prepare for some consolidation as valuations have risen and the potential for further Fed tightening may reduce estimates of future earnings and valuations in the short term. However, we believe the Fed is nearing the end of its monetary tightening cycle, which should be bullish for US equities.

The US Dollar Index (DXY) has turned sideways as growth is capped around the 102.60 level, despite Fed Chairman Jerome Powell confirming that no rate cuts are appropriate this year. Despite three consecutive weeks of rising jobless claims, a jump in the unemployment rate to 3.8%, and easing consumer and producer inflationary pressures due to lower gasoline prices, the Fed believes that core inflation still persists and labor market conditions have not softened enough to declare victory over the sticky Consumer Price Index (CPI).

The price of gold is marching towards the top of the Falling Wedge chart pattern, which suggests a consistent move to the downside followed by a breakout to the upside. The 200-period exponential moving average (EMA) at $1,958.84 is acting as a barricade for gold bulls. Horizontal resistance is plotted from the May 05 low around $2,000.00.

The Relative Strength Index (RSI) (14) is oscillating in the range of 40.00-60.00, indicating directionless performance.

Title: Oil slips as China benchmark rate cuts smaller than expected

June 20, 2023 02:00 AM ET

By: AnalysisWatch

Oil prices fell on Tuesday after China cut key interest rates less than some had expected, raising further concerns about the outlook for oil demand in the world's biggest oil importer.

The price of Brent crude fell 19 cents to $75.90 a barrel at 5:45 GMT. U.S. West Texas Intermediate (WTI) crude for July fell $1.02 to $70.76 from Friday's close. The July contract expires at the end of trading on Tuesday.

The more active WTI crude oil contract for August delivery was down 83 cents from Friday at $71.10 a barrel. There was no settlement of the WTI contract on Monday due to a public holiday in the United States.

China on Tuesday cut two benchmark lending rates - the one-year benchmark lending rate (LPR) and the five-year benchmark lending rate - by 10 basis points each. The cut, the first in 10 months, was less aggressive than some forecasts had predicted, with 50% of respondents to a Reuters poll expecting a 15 basis point cut in the five-year LPR.

The rate cut followed recent economic data that showed China's retail and factory sectors struggling to maintain the momentum seen earlier this year.

China's government met last week to discuss measures to boost economic growth, and several major banks have cut their forecasts for China's economic growth in 2023 amid concerns that its post-Covid recovery is waning.

On Monday, two European Central Bank policymakers argued for further rate hikes amid risks of higher inflation. Markets are also awaiting testimony from US Federal Reserve Chairman Jerome Powell, who will hint at future rate developments later this week.

Higher interest rates reduce the appetite to spend and may reduce demand for oil.

On the supply side, Iran's oil exports and production reached new highs in 2023 despite US sanctions.

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