With the start of trading in 2024, gold futures XAU/USD struggled to establish a direction, with the price of the yellow metal oscillating between positive and negative territory throughout the trading session. Obviously, gold price XAU/USD was affected by the strength of the US dollar and rising Treasury yields. Therefore, gold prices ended 2023 above the $2,000 per ounce level for the first time and is stabilizing around $2,059 per ounce at the time of writing, down from yesterday's resistance of $2,078 per ounce. Gold prices had recorded annual gains of 13%.
The dollar index, which measures the value of the US dollar against a basket of other currencies, rose to its highest level since December 2022 on Tuesday, as investors sought the safety of the US currency amid rising geopolitical tensions. Also, rising Treasury yields weighed on gold, as they make non-yielding gold less attractive to investors.
In the same performance, the prices of silver, the sister commodity to gold, fell below $24 per ounce. The price of white metal declined by about 1% last year.
Will the price of gold decrease in the coming days?
Observers believe that the gold price could maintain momentum due to the Federal Reserve cutting US interest rates in 2024, effectively reducing US currency and bond yields. Some say it may be time to abandon the fundamentals of gold trading in the future. In this regard, Adam Koss, President of Libertas Wealth Management Group, said: “With interest rates pausing and eventually falling, the price of the US dollar falling, and inflation continuing to decline around the world, we must throw all fundamentals to the wind and watch the market when. So, it’s about gold”. Adding, “At this point, the gold trade is all about all-time highs, selling pressure, selling, and breaking above this multi-year level that has been such a problem for the yellow metal in the past.”
In the first trading session of 2024, the US Dollar Index (DXY) rose 0.84% to 102.18, from an opening at 101.42. The DXY dollar index, a measure of the US currency against a basket of currencies, fell about 2% last year, driven by a 4.5% decline in the past three months due to expectations of the federal funds rate. Usually, a strong US dollar is bearish for dollar-denominated commodities because it makes them more expensive for foreign investors to buy.
Another factor affecting the gold market, the US Treasury market was mostly higher across the board, with most of the rise occurring in bonds over two years in value. Recently, the 10-year bond yield added nine basis points to 3.95%. Two-year Treasury yields rose 7.4 basis points to 4.324%, while 30-year Treasury yields rose 7.1 basis points to 4.089%.
As for other metals markets, copper futures fell to $3.8715 per pound. Also, Platinum futures fell to $988.70 an ounce. Similarly, Palladium futures fell to $1,081.00 per ounce.
Gold Price Forecast and Analysis Today:
XAU/USD gold prices are widely expected to continue their bull run in 2024, after returning 13% last year despite a hawkish Fed; Outperforming bonds and most commodities, and performing similarly to the tech-heavy Nasdaq. Therefore, because of a dovish Fed and expectations of rapid interest rate cuts, analysts at JP Morgan estimate a target price of $2,300 per ounce in 2024.
Today, if the gains of the US dollar continue, the bears may find the opportunity to move the price of gold down, and the next support levels will be 2045, 2030, and 2000 dollars per ounce, respectively. On the other hand, the return to the resistance of $2075 per ounce confirms that the bulls still have the momentum to take control. Especially, since global geopolitical tensions are increasing, which may support the demand to buy gold as a safe haven.
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