Today’s market analysis on behalf of Rania Gule Market Analyst at XS.com
The movement of the gold price (XAU/USD) on Thursday depends on the strong recovery witnessed yesterday, currently trading at $2037 per ounce. It is near the 50-day Simple Moving Average (SMA) level at $1983, having breached the key resistance at $1996.70 and stabilized above it.
From my perspective, the price’s halt near the $2040 supply zone, amid the prevailing market risk, is a key factor pressuring the current upward trend. However, cautious statements from the Federal Reserve, along with geopolitical risks and concerns about economic slowdown in China, support the likelihood of further short-term increases.
Especially after some Federal Reserve officials indicated yesterday that the series of interest rate hikes has ended, signaling a clear possibility of a 25-basis point rate cut in 2024. This is based on their belief that inflation is heading toward the central bank’s target of 2% without causing a recession.
This has led to a sharp drop in U.S. Treasury yields, resulting in intense selling of the U.S. dollar, which continues to impact the markets at the start of Thursday’s trading. I believe this will continue to support the gold price, which does not yield returns, particularly as markets await the latest monetary policy updates from the Swiss National Bank (SNB), the Bank of England (BoE), and the European Central Bank (ECB). These updates may cause some market volatility, providing additional momentum before the release of U.S. retail sales data, which is expected to be negative and could offer additional support to gold prices.
However, I believe Jerome Powell’s statements, indicating the Federal Reserve’s full commitment to achieving the 2% inflation target and leaving possibilities open for further increases in the future, along with hints that interest rates are now at or near their peak, support the rise of non-yielding gold in the short term.
Although he did not specify when it would be appropriate to start easing monetary policy, I expect that gold prices will likely continue to rise today, supported by the Federal Reserve’s decision and statements, which caused a more than 15 basis point drop in U.S. Treasury yields, while the 10-year benchmark bonds stabilized at 4.02%. This led to a 0.84% decrease in the Dollar Index (DXY), currently trading at 102.60 points. This means that markets are pricing in data and decisions somewhat balanced.