XAU/USD bulls eye 50% mean reversion


  • Gold price is on the backside of the prior bearish trendline and near-term bias is bullish with markets pricing dovish Fed tilt. 
  • There are eyes on a move towards a 50% mean reversion for the day ahead while above $1,870.

The Gold price finished the day pretty much unchanged amid a US Dollar which was mixed across the board, pushed and pulled over the comments from the Federal Reserve’s Jerome Powell who was speaking at The Economic Club of Washington, D.C. Signature Even.

While he repeated much of the same as he did at the press conference that followed last week’s interest rate decision, the markets jumped on the most dovish of comments that were otherwise surrounded by hawkish rhetoric, and the US Dolla crumbled in a knee-jerk reaction.

Gold rallied only to come back under pressure as the markets digested the comments, moving within a range of between $1,865 and a high of $1,884. In Asia, the Gold price is climbing again and has scored a session high of $1,878.46 so far. 

Fed’s Powell’s key comments

The jobs report was certainly stronger than anyone expected.

The strong jobs report shows you why we think this will be a process that takes a significant period of time.

Expect 2023 to be a year of significant declines in inflation. 

We probably need to do further interest-rate increases.

If data were to continue to come in stronger than expect, would certainly raise rates more.

2% inflation is a global standard and not something the Fed is looking to change.

Fiscal authorities are concerned about the debt limit.

The debt limit debate can only end with congress raising it, which has to happen.

Congress needs to raise debt ceiling in timely fashion

If debt ceiling isnt raised no one should think fed can shield economy from effects.

I am not actively contemplating the sale of securities.

It will be a couple of years before the fed’s balance-sheet decline comes to an end.

The US is ‘just at the beginning’ of the disinflation process.

Worries most about when disinflation will take hold in larger services sector, also concerned about outside events.

China is raising its Gold reserves

Meanwhile, analysts at ANZ Bank said that buying by central banks remains buoyant, with China raising its gold reserves for a third straight month.

analysts at TD Securities explained that their tracking of Shanghai gold traders’ positioning is collapsing. ”Over the last five sessions, SHFE traders liquidated nearly -13.4t of notional gold, which amounts to the fasted-pace liquidation in several years. This corroborates the view that the Chinese buying activity that helped propel gold higher over the last few months was exacerbated by Lunar New Year celebrations amid China’s reopening,” the analysts explained.

”This suggests that a major pillar supporting gold’s recent rally is eroding, but with Shanghai trader positioning now slightly below average, the pace of liquidations might slow. This implies that investors may once again become the marginal buyer or seller, which places CTA trend followers in the driver’s seat. However, while we don’t expect substantial downside flow until prices break the $1840/oz range, the margin of safety against a marginal buying program is low, the analysts at TDS added.”

Gold technical analysis

As the chart illustrates, the Gold price is on the backside of the prior bearish trendline, so the bias is bullish with eyes on a move towards a 50% mean reversion for the day ahead while above $1,870.

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