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Gold Bull Run Continues; Euro Slips on Dovish ECB Comments; Bitcoin ETFs Rise

Published 04/12/2024, 03:31 AM

The Record Bull Run in Gold Continues

Gold (XAU), traditionally a safe-haven asset, once again sets new record highs and remains on track for a fourth consecutive weekly gain.

XAU/USD continues to move towards historic highs, driven by ongoing geopolitical conflicts. Despite a stronger US dollar and expectations of fewer rate cuts by the Federal Reserve (Fed), the bullish momentum in gold remains strong. Heightened worries over Middle East tensions enhance XAU/USD's appeal as a safe-haven asset, pushing the pair higher by 1.63% on Thursday. Additionally, anticipated interest rate cuts by major central banks later this year further support the upward trend in the non-yielding metal. Upcoming monetary policy easing attracts more buyers into gold despite the asset being technically overbought, which could lead to profit-taking.

Vincent Tie, the sales manager at dealer Silver Bullion, expresses optimism about the future of gold prices. 'We expect gold prices to rise in the next 2 months. From a technical perspective, this rally is the result of gold prices breaking out of a record 42-month consolidation period. It's like a coiled spring being let loose now.' Moreover, unexpectedly low US Producer Price Index (PPI) figures yesterday have slightly fuelled hopes for a soon rate cut by the Fed, further strengthening the upward trend in XAU/USD.

XAU/USD reached 2,395 in the Asian trading session and then corrected. Investors are now turning their attention to the upcoming US Michigan Consumer Sentiment report, due at 2:00 p.m. UTC today. Lower-than-expected figures could boost XAU/USD, potentially pushing its value above 2,400. However, the bullish trend in XAU/USD may pause or even break if the data surpasses expectations.

Euro Slips on Dovish ECB Statements and Strong US Data

The euro (EUR) is on track for its most significant weekly drop in nearly 4 months. A strengthening US dollar and anticipation that the European Central Bank (ECB) may cut interest rates before the Federal Reserve (Fed) puts downward pressure on the currency.

The euro declined following the ECB's decision on Thursday to maintain interest rates at a record high. The market expected the base rate to remain unchanged, while the ECB hinted at potential rate cuts in June. Thus, the ECB may begin easing monetary policy before the Fed, as unexpectedly strong US consumer price data almost eliminated hopes that the Fed would begin cutting rates in June. Moreover, market expectations for rate cuts in the US have been scaled back—investors now project only about 40 basis points (bps) of reductions, a decrease from the previously anticipated 60 bps cuts this year. A rise in US Treasury yields towards new highs reflects a significant shift in interest rate expectations.

EUR/USD was declining during the Asian and early European trading sessions. Today, traders should focus on the US Michigan Consumer Sentiment Index, due at 2:00 p.m. UTC. If the data is stronger than expected and shows an improvement in consumer confidence, EUR/USD will almost certainly continue to fall, probably below 1.07000. Otherwise, the short-term bearish trend in EUR/USD may pause or even reverse. The key level to watch is 1.07500. A break above this level will open the way towards 1.07800.

Bitcoin ETFs Continue to Increase in Volume

Bitcoin (BTC) rose this week, bolstered by the unexpected rise in the US inflation rate and positive data from the Bitcoin exchange-traded fund (ETF) market.

The BTC-spot ETF market experienced its second consecutive session of  $18.6 million net outflows on 9 April. Despite the broader market trend, iShares Bitcoin Trust (NASDAQ:IBIT) and Grayscale Bitcoin Trust had significant inflows. BTC prices rallied from 67,193 to 70,901 after the US inflation report on Wednesday due to unexpectedly high inflation figures. The report affected US Treasury yields and further decreased expectations of a rate cut by the Federal Reserve (Fed) in June.

On 10 April, the BTC-spot ETF market was active and contributed to Bitcoin's gains. Yesterday, Grayscale Bitcoin Trust (BTC) (NYSE:GBTC) recorded the lowest net outflows since its launch on 11 January. Meanwhile, net inflows into Fidelity Wise Origin Bitcoin Fund and Bitwise Bitcoin ETF increased substantially. Excluding iShares Bitcoin Trust with net inflows of $33,3 million, the market recorded net inflows of $90.4 million, reflecting a shift in investor sentiment about the possibility of fewer rate cuts by the Fed this year.

BTC/USD rose in the Asian and early European trading sessions. The pair has been moving between 64,000 and 73,000 since 14 March. Now, BTC might drop towards 64,000 before potentially climbing to approximately 82,000. Famed venture capitalist Tim Draper predicts a tripling of Bitcoin's value in 2024, spurred by investments into spot ETFs and the halving event. 'If I had to predict, maybe we could see $250,000 by the end of the year; it's looking pretty good,' Draper said.

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