Home Blog Market Analysis Weekly Market Analysis / 24 January - 28 January 2022

Weekly Market Analysis / 24 January - 28 January 2022

by AgaBullion
Weekly Market Analysis / 24 January - 28 January 2022

Gold registered its highest weekly close since mid-November

  • Sharp decline witnessed in US T-bond yields and technical breakout boosted gold.
  • Focus shifts to high-tier US data releases and FOMC's policy meeting.

After a tarnished start to the week, gold made impressive gains, breaking above a key resistance area on Wednesday and reaching its highest level in nearly two months, near $1,850, on Thursday. From there, the yellow metal went into consolidation mode, giving back some of its weekly gains, but ended up closing the second straight week in positive territory.

What happened last week

The market chatter about the US Federal Reserve considering a 50-basis points rate hike in March increased in volume in the first half of the week and provided a boost to US Treasury bond yields. The benchmark 10-year US T-bond yield rose more than 5% and reached its highest level in two years at 1.9% early Wednesday.

Additionally, billionaire investor Bill Ackman argued that the Fed would need to go for a 50-bps hike to restore its credibility.

In the second half of the week, safe-haven flows started to dominate the financial markets and the sharp retreat witnessed in the US T-bond yields fueled a gold rally.

Gold rose nearly 2% from Tuesday’s closing level and touched its strongest level since November 22 at $1,849 late Thursday. The 10-year US T-bond yield erased all of its weekly gains and returned below 1.8% on Friday.

Next Week

On Wednesday, the Fed will announce its policy rate decision and release the Monetary Policy Statement following its two-day meeting.

Next week’s US economic docket will also feature the US Bureau of Economic Analysis’ first estimate of the fourth-quarter Gross Domestic Product (GDP) growth. The annualized GDP is expected to rise to 5.8% from 2.3% in the third quarter. Such a rebound in economic activity should help the dollar preserve its strength while the opposite could weigh on the currency even if the Fed refrains from delivering a dovish message.

Other high-tier data releases from the US will include December Durable Goods Orders, the Conference Board’s Consumer Confidence Index and IHS Markit’s preliminary January Manufacturing and Services PMI. Nevertheless, market participants are unlikely to react to these data while awaiting the Fed’s policy announcements.

Short Term Outlook

A break of $1,850 opens risk towards $1,870 while a move lower will target $1,830 and then $1,815.

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