- A positive start to the performance of the XAU/USD gold price for this important week, which includes announcements from the Bank of England and the US Federal Reserve, ending with the announcement of US employment figures.
- Recently, gold prices are stabilizing around the $2,030 per ounce level at the time of writing the analysis.
- During last week's trading, gold prices may have been exposed to a downward correction path that pushed them towards the support level of $2,010 per ounce amid the strength of the US dollar on the impact of the results of important economic data.
Meanwhile, inflation in the United States slowed further in December as the "soft landing" economic shift came into sharper focus. According to what was announced last Friday, the Federal Reserve's preferred measure of inflation slowed further last month even as the economy continued to grow rapidly, a trend that is sure to be welcomed at the White House as US President Joe Biden seeks re-election in a race that could focus on his economic management.
lately, US government report on Friday showed that prices rose just 0.2 percent from November to December, a pace that is broadly in line with pre-pandemic levels and barely above the 2 percent annual target set by the Federal Reserve. Compared to the previous year, prices rose 2.6 percent, the same level as in the previous month. Excluding volatile food and energy costs, prices also rose just 0.2 percent month-on-month. Compared to the previous year, so-called "core" prices rose 2.9 percent in December – the smallest increase of its kind since March 2021. Economists consider core prices to be a better measure of the potential path of inflation.
Moderate US inflation data arrived on Friday, a day after government figures showed that the US economy grew at a surprisingly strong annual pace of 3.3 percent in the last three months of last year. Also, strong consumer spending drove growth, capping a year that began with widespread expectations of a recession. Instead, the US economy grew by 2.5 percent in 2023, up from 1.9 percent in 2022.
Biden's Republican critics have sought to highlight the biggest rise in inflation in 40 years, blaming it largely on the US president's spending policies. Moreover, with inflation falling sharply after a long period of gloomy consumer sentiment, Americans are beginning to show signs of improvement about the economy. For example, a measure of US consumer confidence by the University of Michigan jumped in the past two months by the largest amount since 1991.
In general, the latest data indicates that the US economy is achieving a difficult “soft landing,” as inflation declines to the US Federal Reserve’s target of 2% without a recession occurring. This result may make it easier for the Fed to consider cutting its key interest rate, which it has raised 11 times since March 2022 to attack inflation. Moreover, high interest rates have stifled home and car sales by raising the cost of borrowing. Businesses were also angered by rising interest rates.
In December, US Federal Reserve policymakers predicted that they would implement three US interest rate cuts of a quarter of a percentage point this year. However, they offered little hint as to when the first cut might occur. Late last year, Wall Street traders bet that the first-rate cut would occur in March. But many Fed officials disputed such assumptions.
Through 2023, inflation fell steadily as global supply chains recovered from pandemic-era disruptions and more Americans moved off the sidelines to take jobs, helping to slow wage growth. Furthermore, slowing wage increases relieve pressure on companies to raise prices to compensate for rising labor costs. According to the Fed's preferred measure, inflation peaked at 7.1 percent in June 2022.
Gold Price Forecast and Analysis Today:
According to the performance on the daily chart above, bulls are attempting to control the direction of the gold price (XAU/USD). As mentioned before, there won't be an initial shift in the direction downwards without a move towards the support levels at $2000 and $1985, respectively. On the other hand, during the same time frame, resistance levels at $2055 and $2070 for an ounce will continue to affirm the strength and dominance of the bulls in the trend. Shortly, we still recommend buying gold from all dip as global geopolitical tensions remain a strong support for the gold market.
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