- Throughout this week, the price of gold has been in a corrective downtrend, moving towards the support level of $1984 per ounce, its lowest point in two months.
- The primary factor behind the decline in gold prices has been the strong rise in the value of the US dollar and Treasury bond yields, as the Federal Reserve continues its path of tightening monetary policy for a longer period, especially after announcing stronger-than-expected US job numbers and inflation.
- Now, gold prices are stabilizing around the $2002 per ounce level at the time of writing this analysis.
Clearly, the US dollar has been the best-performing currency in 2024 amid a significant reassessment of US interest rate expectations. The degree to which the pricing curve is shifted higher will impact how far the US dollar can advance. With its bullish view on the US dollar now confirmed, HSBC Bank suggests that most of the moves in response to shifts in interest rate expectations may have already occurred, potentially limiting the scope for further significant gains. This reassessment has long been a key part of the bullish view on the US dollar, aiding the currency through rising yields and a hit to risk appetite. While there may still be more work ahead, the lion's share of the interest rate adjustment may already be priced in. Currently, the market may be pricing in US rate cuts and ending up being more "hawkish" than the Federal Reserve, but caution is advised against fighting the Fed.
Meanwhile, the convergence between the Fed's guidance and market expectations is an implicit realization by investors who now see the US central bank as credible.
On another level, US stock market indices stabilized yesterday, a day after they slid to sharp losses due to fears that high interest rates may continue for months longer than hoped. According to stock trading platforms, the Standard & Poor's 500 index rose by 0.6% in late trading after falling by 1.4% on Tuesday. Recently, a higher-than-expected report on US inflation forced investors to delay expectations about when the Federal Reserve might start cutting interest rates, perhaps in the summer. Additionally, expectations of such cuts are a big reason why stocks have soared to record highs recently.
According to trading the Dow Jones Industrial Average rose by 52 points, or 0.1%, after falling by 524 points, recording its worst loss in nearly 11 months. Also, the Nasdaq Composite Index rose 0.9%, with an hour remaining before the start of trading. As for US small-cap stocks, which were severely affected by concerns about rising interest rates on Tuesday, they rebounded more than the rest of the market. Moreover, the Russell 2000 index jumped 2.3%. What helped keep things more stable was a calmer bond market. Treasury bond yields fell after rising the previous day amid expectations that the Federal Reserve will keep US interest rates high for a longer period. Ultimately, the Fed bank has already raised its key interest rate to the highest level since 2001 in hopes of slowing the overall economy enough to bring high inflation down to its target.
Gold Price Forecast and Analysis Today:
According to the performance on the daily time frame chart, the price of gold is still under downward pressure in light of the strength of the US dollar, the most prominent in the markets recently, which negatively affects gold. Currently, gold prices are heading towards new buying levels, the closest of which are currently 1985 and 1968 dollars per ounce, which is sufficient to push the technical indicators. Aim for strong saturation levels by selling, we still prefer to buy gold from every bearish level. Moreover, global geopolitical tensions are increasing and are a fertile environment for a recovery in the price of gold in the near and medium term. Also, bulls may regain control if the gold price moves above the resistance of $2025 per ounce again. The price of the US dollar, as well as gold, will be affected by the announcement of US retail sales numbers and the number of weekly US jobless claims, not to mention the extent to which investors are willing to take risks or not.
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