Key buying levels as gold dips to $2020/oz amid US bond yield rise. Awaiting inflation data for Fed rate cut insights, with strong support at $1960/oz, and geopolitical tensions influencing market.
- By the end of last week's trading, gold prices retreated once again to the support level of $2020 per ounce after a period of stability in the midst of a quiet trading week.
- Recently, the losses in the yellow metal increased due to pressure from rising US bond yields, while investors awaited US inflation data this week for further clues on the path of US interest rate cuts by the Federal Reserve.
At the same time, yields on the benchmark 10-year US Treasury bonds rose to their highest level in two weeks, and yields on 2-year bonds reached their highest level in almost two months, making non-yield-bearing bullion less enticing for investors.
Will the Price of Gold Decrease in the Coming Days?
In this regard, Everett Millman, chief market analyst at Gainesville Queens, said in a note to Reuters that the US Federal Reserve appears to be keeping US interest rates high for a longer period, which means that most central banks will likely follow suit. He added, “I think things are heading downward for the price of gold, and there is very strong support at around $1960, and I do not expect to see the price of gold fall below.”
On the US Central Bank policy front. Several Fed officials, including Chairman Jerome Powell, have said they want to see more evidence that inflation will continue to decline before cutting interest rates. Moreover, revised government data showed on Friday that monthly consumer prices in the United States of America rose less than initial estimates in December. Currently, Market participants are awaiting January CPI numbers, scheduled for release next Tuesday.
Now, traders see a 62% chance of a US interest rate cut in May, according to the CME Fedwatch tool.
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Moreover, the pulse of inflation in the United States of America is likely to continue to slow at the beginning of 2024, helping to fuel expectations that the Federal Reserve will find interest rate cuts more acceptable in the coming months. The core CPI, a measure that excludes food and fuel to get a better picture of core inflation, is expected to rise 3.7% in January from a year earlier.
Obviously, that would represent the smallest year-over-year advance since April 2021, and highlights the successes of Fed Chairman Jerome Powell and his colleagues in beating inflation. The overall US Consumer Price Index is likely to rise by less than 3% for the first time in nearly two years, as economists expected a report to show tomorrow, Tuesday. Despite acknowledging this progress, policymakers did not accept the possibility of lowering US interest rates as soon as next month. The slowdown in inflation, coupled with expectations that borrowing costs will fall this year, explains the recent improvement in US consumer confidence. Next Friday, the University of Michigan poll scheduled to be released is expected to show that the sentiment index remains near the highest level since July 2021.
Gold Price Forecast and Analysis Today:
According to the performance on the daily time frame chart, the price of gold is still in a neutral position. Technically, the tendency will be more bearish if prices move to the support levels of 2000 and 1985 dollars per ounce, respectively. From these levels and below, it is best to return to buying gold again, as global geopolitical tensions continue to support the gold market in the medium and long term. This is in addition to the increase in global central banks’ purchases of gold for hedging. On the other hand, over the same time period, the bulls’ control over the direction of gold will strengthen if prices return towards the resistance levels of 2055 and 2070 dollars per ounce again.