Gold prices have continued to recover and are now trading around $1749. The Fed announced that it would keep interest rates unchanged, avoid signals of an immediate rate hike and raise economic forecasts, moderating market sentiment to push the dollar down and prop up gold's rally. Ahead of the upcoming high-level meeting between China and the United States, the latest risk may come from Chinese companies, which are seeking to reverse punitive measures taken by former President Donald Trump. But investors need to watch carefully the direction of US bond yields, and a sustained rise will still limit the upside of gold prices.
As of press time, the price of gold rose 0.27% to $1750.20. The yield on the 10-year Treasury note rose 0.42 per cent to 1.648.
Fundamental analysis: Fed interest rate hike is expected to fail, risk aversion and cautious sentiment is strong.
The Fed sharply raised its forecast for economic growth, but said that although the economic outlook has improved and inflation has risen this year, it does not expect to raise interest rates until 2023. As widely expected, the policy-making Federal Open Market Committee (FOMC) also voted to keep short-term borrowing rates close to zero while continuing with its asset purchase program, in which the Fed buys at least $120 billion of bonds a month.
According to quarterly economic forecasts submitted by members of the Federal Open Market Committee, US gross domestic product ((GDP)) is expected to grow by 6.5% in 2021 and will cool down in the next few years. The median estimate is an improvement from the 4.2 per cent forecast in the previous round in December. The Fed expects GDP to grow by 3.3 per cent in 2022 and 2.2 per cent in 2023, after which growth will stabilize in the longer-term range of 2.3 per cent.
But against a backdrop of risk aversion, unless Treasury yields do not extend the post-Fed rally, the latest strength in Wall Street's benchmark index is likely to help gold buyers maintain hope. In addition, comments from the Australian and English central banks and policy makers are likely to provide positive guidance for the future.
Fundamental analysis: Chinese companies seek to reverse policy to lift Trump sanctions ban
During the administration of former US President Donald Trump, a number of Chinese companies were blacklisted for investment sanctions. With the lifting of US court sanctions on Xiaomi, a number of Chinese companies are seeking the help of lawyers to develop strategies to challenge the US investment ban and to resume listing on the US stock market.
Contreras marked Xiaomi's ban as a "serious flaw" in the procedures of the former US government, pointing out that Xiaomi was blacklisted on two bases, namely, the US Department of Defense said the development of its 5G technology and artificial intelligence was essential for modern military operations. On the other hand, Lei Jun, Xiaomi's founder and chief executive, was awarded an award, saying it was designed to help the Chinese government remove barriers between the commercial and military sectors.
With the prospect of recovery, Wendy Wysong, managing partner of the Hong Kong office of Steptoe&Johnson, a global law firm based in Washington, said: "the company is looking for lawyers to challenge the listing, and there are reasons to go public." But as of the deadline, neither Steptoe&Johnson nor Hogan Lovells would disclose the names of the Chinese companies involved in the discussions.
In order for the United States to strengthen its hard line against China, and President Joe Biden joined it at the same time, Trump signed an executive order before leaving office, which was later expanded to ban all American investors from November 11, 2021. Holding any securities on the sanctions list. Since Biden took office, the ban has not been lifted.
So it all depends on how US President Joe Biden responds to the wishes of Chinese companies and how he refreshes relations with the world's second-largest economy during the China-US meeting.
Technical analysis:
Gold bulls break through the 21-day moving average, currently around $1741, enabling bulls to cross the 2.5-month resistance line, currently $1750, and will continue to challenge breaking through the $1765 mark. At the same time, falling below $1741 will remind gold sellers of the $1700 threshold.
