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Weekly Summary (31/01/2022)

Interest expect continued added, risk fund keep leave suppress gold market

Gold continued to show downward trend in last week which falling below 1780 and closed at 1789 at the end . U.S. economics data show that the current inflation level going to high. The Federal Reserve strongly said that it would raise interest rates many times in this year. The market's expectation in upcoming interest rate increase has been enhanced and the risk fund flows out of hedging products which was leading to the gold price declined. Although has these factors such as the situation in Ukraine have played a stimulating role but the effect were very limited.

The Fed made strong statement on inflation. In order to deal with the continuous recorded high inflation, the Fed will use monetary policy to deal with it. Powell said that the Fed has many room for policy contraction. This leads to the current market situation very unfavorable to gold bulls. Investors' expectation in raising interest rates is dominating the gold market. Although the price has fallen below 1780, it is still obviously not at the bottom. The others inflation data, the US GDP in the fourth quarter of 2021, the personal consumption expenditure index and the trillion dollar rescue fund put into the market in response to the epidemic are pushing up the economy and inflation. The market has become more and more positive about the expectation in raising interest rates and the reverse thrust of the obvious improvement of the US dollar index has put a heavy pressure on the price of gold.

In terms of the epidemic situation, although Omicron has had a new impact on the supply chain, many countries such as the UK have given up and the economic chain has not been too hard hit by the Omicron epidemic. When people in Europe and the United States have gradually considered the epidemic situation separately from the intensity of market activities, the epidemic factors can not stop inflation.

The situation in Ukraine vs Russia, Ukraine and Western countries confront each other in diplomatically and militarily which may cause possibility and risk of local conflict. The funds flowed to gold and the US dollar but did not play a significant role in supporting the middle line gold price.

Influence factors in this week's gold price:

1.  Fed's interest rate expection and the Fed's trend

We need to continue to pay attention to the information on the US dollar interest rate issue in this week. At present, the market's expectation of interest rate increase has reached a relatively strong level. We need to pay attention to the market mood change before interest rate increase.  Now the market expectation plays a decisive role in the medium-term price.

2. Changes in the situation in Ukraine

At present, there is a tense confrontation between Russia and Western countries in Ukraine. If there is any change in this situation, the two sides will stimulate the short-term market and cause short-term fluctuations through negotiation or military friction.

3. Epidemic situation

At present, the impact of Omicron on the economy is gradually fading but we need to pay attention to whether there has information about new variants of viruses and vaccines and pay attention to the possible short-term price incentives.

Basic strategy in this week:

Under the backdrop of interest rate added, gold prices will generally show pessimistic downward trend, focusing on the 1750-80 downward range in this week.Pay attention in the sudden information stimulation in geopolitics and 1800 above. If there has emergency incentive to stimulate the upward price, we can consider buy side in the short term. Friday's non-farm data will further show that inflation and employment and decide promote or delay the motivation and timing of the Fed's interest rate action, which needs to be focused.

Technical analysis: there are short-term opportunities below 1800

Last week, the price was Keep in low position and always run below the 5-day / 10-day moving average and guided the moving average continue to decline. In the end, the 5-day line pierced the 10-day line upward and walked short-term upward trend. The cloud layer in the ichimuko was still above the price and the short-term are very difficult to touch it. Pay attention to 1790-1800 at the Monday opening for win the opportunity in short-term rise.

The RSI value in about 43, exceeding the benchmark value of 30, indicating that the market is currently in the middle position and there has certain distance between 70 overbought and 20 oversold, still has certain opportunity in the upward range to 1800 in short-term.

Key messages in this week:

Wednesday: 21:15 US January ADP employment (10000) (Reflecting the economy healthy operation )

Thursday: 21:30 Initial jobless claims in the United States for the week ended January 29 (10000) (Reflecting labor market conditions)

Thursday: 21:30 Final value (%) of December durable goods orders in the United States (Reflecting the operation condition of the manufacturing industry)

Thursday: 23:00 US December factory order rate (%) (Reflecting the operation of the manufacturing industry)

Friday: 21:30  US January Non-farm date(reflecting the healthy operation of the economy and employment)

Friday: 21:30 US January unemployment rate (%) (Reflecting the healthy operation of the economy and employment)

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