Economic Trends

World economy to hit 'speed limit' — the maximum long-term rate at which it can grow without sparking inflation — amid banking crises and recessions.

Central banks have pegged inflation at less than 2%, causing chaos in economic and financial markets. The balance between inflation, growth, and financial pressure will shape the gold market.

The GBPUSD fell slightly during the European session on Tuesday after trying to break the key threshold of 1.2343 but stalled ahead of the test target; Overall, the firm bullish stance remains. The comments by Bank of England (BOE) Governor Bailey sparked expectations of further interest rate hikes, which supported the GBP.

Gold prices got a boost after last week's Fed rate decision and briefly broke above $2,000 twice on Thursday. However, resistance to the further upside appears strong enough to limit the bulls to staying below the weekly chart (entity) of $1986 (week of March 7, 2022). Given the recent market turmoil and the shift in the Fed's stance, we believe that gold prices will remain below that level regardless of this week's volatility, meaning any price move higher is an opportunity to go short.

At an incredible end to the first quarter for financial markets, rattled by bank turmoil, some stability will be much hoped for in coming days.

A look at the day ahead in Asian markets from Jamie McGeever.

Amid ongoing jitters about the fallout from the banking sector, inflation will fall back into the limelight next week. The flash CPI readings for the euro area as well as the PCE inflation figures out of the United States will grab most of the headlines, in an otherwise quiet week. Australia will also get inflation data, and in Japan, Tokyo prices will be watched. Hot CPI numbers could roil markets as central banks have indicated that they are not about to take their eye off the ball during these turbulent times.

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With the flash PMI surveys signalling a second month of rising output in March, the UK economy looks to have returned to growth in the first quarter. The surveys are broadly consistent with GDP growing at only a modest quarterly rate of 0.2%, but this represents a welcome expansion compared to the lack of growth seen in the second half of last year.

With the market remaining on its toes regarding the ongoing banking sector issues, next week brings significant data in the euroland in the form of business surveys and inflation data. The ECB is clearly interested in these economic releases, particularly following last meeting’s change of strategy. However, there is a lingering fear about further negative banking news that could possibly derail the ECB’s tightening effort and put a stop to the euro’s rally.