The Gold Price Remains Elevated as Traders Continue to Buy the Dips
The gold (XAU) price rose by 0.76% on Wednesday as the US dollar continued to weaken on hopes that the Federal Reserve (Fed) would cut its base rate in June despite a higher-than-expected Consumer Price Index (CPI) data published on Tuesday.
The latest US Bureau of Labour Statistics report indicated that inflation wasn't slowing as the market had expected. Still, investors refuse to believe the Fed could delay interest rate cuts any further. Traders continue to price in an almost 70% probability that the easing of the monetary policy will begin in June. As a result, gold prices remain elevated, and traders seem to be driven by the 'buy-the-dip' mood.
"The situation for gold bulls right now is a win-win; if the Fed cuts rates, gold jumps substantially. If they don't cut rates, there will be concerns about inflation that could push gold higher," said Bob Haberkorn, the senior market strategist at RJO Futures.
XAU/USD was falling slightly during the Asian and early European trading sessions. Today, the market will likely face above-normal volatility in the American session as the US will release a batch of important macroeconomic statistics. Three reports—Producer Price Index (PPI), Retail Sales, and Jobless Claims—will be published at 12:30 p.m. UTC and will likely cause sharp moves in all USD pairs. Stronger-than-expected figures—indicating rising prices, solid consumer confidence, and a tight labour market—will likely have a bearish impact on XAU/USD. Otherwise, weak figures will likely push XAU/USD higher. The key levels to watch are 2,180 and 2,160.
The Euro Rises on the US Dollar's Weakness
The euro (EUR) rose by 0.2% as the US dollar weakened on Wednesday due to investors consolidating gains ahead of this week's economic data.
The US dollar weakened yesterday, losing some gains made after unexpectedly high US inflation figures. Investors are now repositioning and awaiting more economic updates to define the Federal Reserve's (Fed) monetary policy path this year. The February US Consumer Price Index (CPI) showed a higher-than-expected increase in prices, indicating persistent inflation. Month-on-month data aligned with the forecast, while the annual figures slightly exceeded predictions. Market expectations for a rate cut by the Fed before summer remain low, according to the CME FedWatch Tool.
Conversely, expectations for the European Central Bank (ECB) to cut interest rates by June are high, potentially putting downward pressure on the euro. Also, a dip in the eurozone industrial production at the beginning of the year hints at potential economic challenges. ECB official Francois Villeroy de Galhau hints at a possible rate cut in spring, and Martins Kazaks suggests rate reductions could start if economic conditions meet ECB forecasts. Upcoming speeches by ECB members Frank Elderson and Isabel Schnabel could also clarify the central bank's stance.
In today's Asian trading session, EUR/USD stayed close to 1.09500, attempting to preserve yesterday's gains. Today, traders should pay attention to US reports: the Producer Price Index, the Retail Sales, and Initial Jobless Claims, all due at 12:30 p.m. UTC. These reports will provide insights into the current state of the US labour market and inflation rate and affect investors' interest rate expectations, which could impact EUR/USD. If the data exceed expectations, the chance of a rate cut by the Fed in summer may decrease, leading to a drop in EUR/USD, possibly below 1.09000. Otherwise, chances for the imminent rate cut will rise, potentially driving EUR/USD higher, towards 1.09800.
Bitcoin Soars to Fresh All-Time High as Bull Run Enters 'Euphoria Zone'
On Wednesday, Bitcoin (BTC) reached a historical high near 73,700 on the back of a capital rotation from long-term holders to new investors.
This week's The Week Onchain report from Glassnode highlights that Bitcoin has surpassed its all-time high of 69,000 in November 2021, marking the fourth historic peak in its life cycle. Analyst Checkmate points out the recent surge past 72,000, propelling this phase of the Bitcoin bull run into the 'euphoria zone', a stage typically associated with setting new all-time highs. Other data indicates that the market sentiment is currently in the 'extreme greed zone': investors may become overly enthusiastic as the market rises, leading to fear of missing out (FOMO) and attracting speculators.
MicroStrategy, the software development company, recently filed for a $500 million convertible debt offering to fund more Bitcoin purchases. This follows an $800 million raise used to buy 12,000 bitcoins. MicroStrategy's Bitcoin holdings could reach 205,000, valued at nearly $15 billion. With the new funds, they might buy an additional 6,800 bitcoins with BTC prices at around 73,000. Overall, the interest of large companies in Bitcoin suggests that its growth potential has not yet been exhausted.
During the Asian trading session, BTC/USD attempted to surpass yesterday's high but failed to break above the strong resistance at 73,700. Swissblock, the digital asset analytics firm, noted on Wednesday that after Bitcoin's price almost doubled from 38,000 since late January without experiencing significant drops, a period of consolidation might be upcoming. They emphasised that 'nothing rallies in a straight line. Not even BTC,' hinting at a potential correction.
Natural Gas Drops to a Three-Week Low on Weak Demand
The natural gas (XNG) price dropped by more than 3% on Wednesday. Weather prediction models indicated that temperature in the US over the next 15 days would rise faster than expected, hurting heating demand estimates. In addition, an ongoing outage at the Freeport liquefied natural gas (LNG) export plant in Texas has reduced the aggregate volume of natural gas flowing to liquefaction. Overall, the front-month futures contract has lost over 15% in the past six trading sessions. However, XNG/USD is now sitting on strong support in the 1.6500–1.600 area, while natural gas companies continue reducing production to alleviate the storage surplus and lift the prices.
XNG/USD was essentially unchanged during the Asian and early European trading sessions. Today, the US Energy Information Agency (EIA) will publish its regular Natural Gas Storage report at 2:30 p.m. UTC. The data will almost certainly affect the price of US natural gas. The EIA report will indicate the change in the volume of natural gas held in the underground storage over the past week. According to Reuters, analysts expect the stockpiles to have decreased by 3 billion cubic feet in the week to 8 March. The report will be bullish if the EIA shows a larger-than-expected stock decline, pushing XNG/USD towards 1.80. Alternatively, a smaller decline in inventories than forecasted may bring XNG/USD down, probably towards 1.60.