Gold
Gold also finished last week higher by +1.82% – largely benefiting from a weaker U.S. dollar index.
The chart above shows how the U.S. dollar index has broken below the ascending triangle that we highlighted last week. Consistent with its oversold condition, the dollar seems poised for a breather at the current levels.
Having said that, the upcoming $120 Treasury bond auction on the 27th could introduce volatility on interest rates, and therefore the dollar.
There is an interesting dynamic going into the bond auction this week: on one hand, investors have little incentive to buy bonds at the moment – with interest rates set to keep rising, albeit at a slower pace. On the other hand, international investors seem jittery after the new Chinese government cabinet was announced – which may drive some of them to swap Chinese bonds for American ones. They could provide a surprising bid on U.S. bonds and keep interest rates at bay.
Keep in mind that there’s also a Fed meeting next week, which could change expectations around interest rates.
Gold will continue facing pressure until Central Banks signal that they will ease off tightening monetary policy.
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