- At the start of trading this important week for the US dollar, gold futures posted modest gains even after rising US Treasury yields and a rising US dollar.
- Overall, the yellow metal is on track for its seventh straight record close.
The question is: can gold prices reach $2200? The price of gold rose today to the resistance level of $2189 per ounce, lower than the resistance of $2195 per ounce at the end of last week. The price of gold stabilized around the level of $2181 per ounce at the time of writing the analysis. In general, gold prices have increased by approximately 6% since the beginning of 2024.
Similarly, silver prices, the sister commodity of gold, are looking to the $25 per ounce level. Overall, the white metal has risen by about 3% since the beginning of 2024 so far.
According to gold trading platforms, gold prices continued to gain amid expectations that the Federal Reserve will pull the trigger to cut US interest rates later this year. Despite the mixed expectations, the futures market expects the first rate cut at the Federal Open Market Committee (FOMC) policy meeting in June.
In the meantime, the gold market is still advancing amid a strong US dollar and rising Treasury yields. The US dollar index (DXY), a measure of the US currency against a basket of other major currencies, rose to 102.86 from its opening of 102.71. The index has pared some of its gains this year, rising just 1.5%. A strong US dollar is usually bad for dollar-denominated commodities because it makes them more expensive for foreign investors to buy.
Another factor affecting gold is that US Treasury yields have mostly risen across the board, with the yield on the 10-year note rising one basis point to 4.1%. Also, the yield on the two-year note jumped five basis points to 4.54%, while the yield on the 30-year note was flat at 4.265%. As is known, the gold price is sensitive to interest rate movements because it affects the opportunity cost of holding bullion that does not generate a return.
Spot gold was trading in a narrow range on Monday after rising nearly 5% last week, hitting its highest nominal level in four consecutive days. On Friday, the gains were supported by US data showing the US unemployment rate at a two-year high, which helped push the US dollar and 10-year Treasury yields lower.
Gold prices had risen in March, a move that surprised some investors given little change in expectations about when the Fed would start cutting US interest rates. In testimony before Congress last week, Fed Chairman Jerome Powell stressed that the US central bank needs "more evidence" that inflation is heading towards its 2% target before lowering borrowing costs. His fellow policymakers have made similar comments. Therefore, a test of this week's gold bull optimism will come with the release of new US inflation data today. Moreover, a hotter-than-expected reading – as happened last month – would be a setback for further gains in the precious metal, which offers no return and benefits from a low-rate environment.
Gold Price Forecast and Analysis Today:
There is no change in my technical outlook as the overall trend for the price of gold remains bullish. Based on the performance on the daily chart above, gold gains have pushed technical indicators towards strong buying saturation levels, and profit-taking sales could occur at any time. Especially, if the US dollar gains positive momentum from the strength of US inflation figures today. If that happens, support levels of $2155 and $2140 are likely targets for selling. There won't be a fundamental shift in direction without movement towards the psychological level of $2000 per ounce. Therefore, if the dollar fails to gain positive momentum, the overall outlook for gold may remain bullish for a period of time.
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