- For three consecutive trading sessions, the price of gold has attempted to rebound higher, but gains have not exceeded the level of $2023 per ounce.
- As mentioned yesterday, the American holiday at the beginning of the week's trading may affect liquidity and performance, and the price of gold may remain within narrow ranges until reactions to the announcement of the content of the latest Federal Reserve meeting minutes and hints from other global central banks, along with the trajectory of global geopolitical tensions, are observed.
On the economic front, a report on U.S. wholesale inflation served as the latest reminder that the battle against rising prices is far from over. Prices rose more than expected in January, following a similar report earlier in the same week that showed an increase in the cost of living for American consumers beyond expectations. Overall, economic data have kept the door closed to the hope that the Federal Reserve will begin cutting U.S. interest rates in March, as traders had hoped. Also, it dampens bets that the Federal Reserve's move to ease conditions on the economy and financial markets may come as early as May.
As is known, high interest rates and returns make borrowing more expensive, which leads to a slowdown in the economy and harms investment prices. In the meantime, the hope is that the US economy will remain resilient despite the challenge of high interest rates. Therefore, this would allow companies to achieve earnings growth that could help support stock prices.
On the other hand, a preliminary report last Thursday indicated that sentiment among American consumers is improving, but not as much as economists had hoped. This is key because consumer spending makes up the bulk of the economy. For its part, BNP Bank indicates that US economic data was broadly strong, which may prevent the US Federal Reserve’s early moved to cut interest rates and provide some support to the US dollar. Moreover, it still sees greater downside risks for the US currency; “While the data could threaten the progress of inflation and support the relative differentials in US interest rates with the rest of the world, we still believe that the largest movement in the US dollar will be to the downside if activity data slows.”
Ultimately, the bank's central argument is for the Fed to make the first US interest rate cut in May, but it notes that there is a high degree of uncertainty. The bank's main argument remains that the value of the US dollar will decline due to shifts in global capital flows. The bank notes: “The US dollar is expensive relative to fair value over the long term, and foreign investors have accumulated large positions in US dollar-denominated assets without hedging much foreign currency exposure.”
Meanwhile, if the funds decide to increase their hedging ratios, there will be significant net selling of the US dollar in global markets, which would undermine the US currency, perhaps sharply. Also, the bank expects yield spreads against global currencies to narrow as the US Federal Reserve imposes significant interest rate cuts.
Gold Price Forecast and Analysis Today:
According to the performance on the daily chart above, the price of gold is still looking for stimulation. Technically, the $2030 and $2055 resistance levels will currently support the bulls’ control of the trend again. As we previously recommended, according to the direct trading recommendations page, to buy gold from every falling level, global geopolitical tensions are increasing, which is a good environment for a recovery in the price of gold. Currently, the best buying levels are 2000 and 1985 dollars per ounce. Obviously, the gold market this week will be affected by the level of the price of the US dollar and the extent to which investors are willing to take risks or not. Also, the reaction to the content of the minutes of the last meeting of the US Federal Reserve and the readings of purchasing managers’ indices for the manufacturing and services sectors of the economies of the United States, Britain, and the Eurozone.
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