Goldman Sachs Report: Catalyst for Dow Volatility?

The US Dollar is again on the back foot this morning after more negative news for the US. Brookfield, one of the largest developers in the US, is confirming the group has defaulted on a $161 million mortgage. According to company officials, the funds were used to build 12 office buildings around Washington. The US Dollar also continues to be under pressure from weaker inflation data. 

The US Consumer Price Index read 0.1% instead of 0.2%, and the yearly inflation rate declined by 1%. In addition, the producer level's inflation rate showed a significant decline for the second consecutive month and was 0.5% lower than expected. Economic data, such as inflation, show a halt in the hiking cycle. The Federal Reserve will consider the lower inflation rate, the weakness in the banking sector, and the latest Sales data, which again declined. The expected dovish central bank is contributing to the Dollar’s weakness. 

The US Dollar Index hovers at 101.90, 0.20% lower than the daily open price. The best-performing currency throughout this morning’s Asian session is the Pound, which is increasing in value against all competitors. At the same time, the worst-performing currency is the Japanese Yen.

Gold - Market Speculate a Decline

The price of Gold continues to increase, continuing the bullish impulse wave formed at the start of the US trading session. The weaker Dollar has supported the price, the instability again increasing in the North African region, Brookfield’s latest mortgage default, and Blackrock selling mortgage-backed securities. The instability and uncertainty support investor demand for the safe haven asset. However, technical analysis is pointing to a possible downturn in the short term. 

Gold 1-Hour Chart on April 18th

This morning's price has increased 0.33% and is up almost 1% since yesterday’s price lows. However, the price movement since the 14th indicates a bearish trend in the medium term. The price is forming lower lows and lower highs, known as an official downward trend. In addition to this, the price continues to trade below most moving averages and 50.00 on the RSI. 

The previous retracement measures 1.15%, meaning the current bullish trend follows a similar pattern. Bearish traders monitor the $1,992.70 and $1,980.92 levels, which act as a bearish signal. The downward trend may form a further low impulse wave if the price declines below these levels. 

However, many economists still believe the safe haven will be able to maintain a price above $2,000. The number of speculative positions within the latest US Commodity Futures Trading Commission report supports a possible downward trend. According to the report, there are 75,000 contracts speculating a decline and 29,000 speculating an upward trend. 

Dow Jones - Investors Focused on Goldman Sachs Report

Over the past week, the Dow Jones has been the best-performing index, increasing by 1.20%. The index outperforms the S&P 500 (+1.00%) and the NASDAQ (+0.36%). The upward trend started in mid-March, as the index was significantly under-priced and experienced a much more substantial decline the month before than other similar assets. In addition, earnings reports, faster Chinese economic growth, and the banking liquidity crisis cooling off are fuelling the climb.

Dow Jones 1-Hour Chart on April 18th

Most company stocks are experiencing healthy price movement as earnings report edge closer. However, some companies have published theirs and pushed the Dow Jones higher. J.P. Morgan, Wells Fargo, and Blackrock have all released quarterly earnings reports for the first quarter of 2023. J.P. Morgan’s earning report showed a Revenue was more than 7% higher than economists had expected, and the earnings per share were 20% higher. The Earnings Per Share and Revenue were higher than in the previous quarter. 

The Earnings Report, specifically J.P. Morgan, contribute to the climb; however, the Goldman Sachs report will be more critical.  Goldman Sachs is the second-highest weighted component within the Dow Jones. Goldman Sachs’s weight reads 6.55%, which is more than double that of JP Morgans. Wall Street analysts expect Goldman Sachs Earnings Per Share will read $8.00 and Revenue $12.66 Billion. Analysts expect the report to be made public today before the opening of the US trading session. 

Traders should note that Goldman Sach’s stocks will likely spike, and the Dow Jones will experience higher volatility. This will be the main event for the Dow Jones throughout the day. 

Summary: 

• Brookfield, one of the largest developers in the US, is confirming the group has defaulted on a $161 million mortgage.
• The US Dollar also continues to be under pressure from weaker inflation data. Economists expect no further interest hikes, but neither a pivot.
• Technical analysis is pointing to a possible downturn for Gold in the short term. More contracts speculating a decline, according to the US Commission. 
• The Dow Jones has been the best-performing index, increasing by 1.20% after J.P. Morgans's positive earning report. Investors turn their attention to Goldman Sach’s scheduled report.