Gold selling has continued since the start of trading this week, with losses reaching the level of $2,021 per ounce, amid gains in the US dollar since the announcement of stronger-than-expected US employment figures. As we mentioned before, the price of gold XAU/USD is still receiving momentum that weakens recent selling. The market's focus today, Thursday, is on the US government's release of its latest monthly update on consumer inflation. Moreover, the slowdown there since its peak in the summer of 2022 has raised hopes that the Federal Reserve may sharply cut US interest rates this year. Thus, this in turn has led to a decline in US Treasury yields in the bond market and a rise in stock prices to record levels.
Economists expect today's report to show that prices paid by American consumers were up 3.2% in December from a year earlier, according to FactSet. This would be a slight acceleration from the inflation rate of 3.1% in November. However, after ignoring the effects of food and fuel prices, which can change quickly from month to month, economists believe that underlying inflation trends are likely to continue to slow.
The US Federal Reserve has noted the slowdown in inflation and has hinted at the possibility of cutting interest rates three times this year, 2024. This would be a sharp turnaround after it raised interest rates significantly in the hope of slowing the economy and hurting investment prices enough to reduce high inflation. Moreover, many traders expect this number of interest rate cuts to double. Critics say this is overly optimistic and that the Fed is unlikely to cut that number many times unless a recession hits. Therefore, if today's inflation data is warmer than expected, it could turn these hopes upside down and shake the market.
In stock markets, Tokyo's Nikkei 225 index rose 2% to its highest level since March 1990 as a weak Japanese yen lifted exporters' shares. Recently, the yen fell amid speculation that the Bank of Japan may maintain its ultra-loose monetary policies after wages fell for the twentieth consecutive month in November. Therefore, a weak yen could boost the profits of companies that sell their products in other currencies. Meanwhile, the indicators were mostly lower across Asia and mixed in European markets.
In the cryptocurrency market, Bitcoin fell after a significant rise that saw its prices rise and then decline the previous day. Also, Cryptocurrency investors have been excited about the possibility of US regulators allowing the trading of exchange-traded funds containing actual bitcoins, rather than just futures contracts related to them.
Gold Price Forecast and Analysis Today:
According to the daily chart above, the downtrend channel that the price of gold XAU/USD has formed recently has not been strong enough to indicate a general trend reversal. Obviously, a true trend reversal will not occur without a move towards the support levels of $2,000 and $1,985 per ounce, respectively. Also, this could happen if today's US inflation figures come in stronger than expected, which could support the tightening of US monetary policy. On the other hand, if today's US inflation figures come in weaker than expected, gold bulls may find the opportunity to move higher. Technically, the nearest resistance levels for this could be $2,048 and $2,070, respectively.
In general, we still prefer to buy gold from every falling level, as it receives strengths from the increase in global geopolitical tensions and the increase in central banks’ purchases of gold for hedging.
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