- The price of Gold has risen sharply, supported by a drop in U.S. Treasury bond yields and positive market sentiment.
- Despite the prevailing appetite for risk, Gold continues to draw in investors, going against the usual patterns of safe-haven assets.
- Market mood shifts in response to the Federal Reserve’s careful position, with predictions of substantial interest rate cuts by the end of the year.
The price of Gold continues its upward trend for the week on Friday and is poised to end the week positively, benefiting from the decline in U.S. Treasury bond yields during a period of limited news updates. Federal Reserve representatives kept communicating through various channels, with New York Fed President John Williams echoing the sentiments expressed by his peers. The XAU/USD is currently trading at $2,038, showing a 0.70% increase.
In general, a decrease in interest in safe-haven options is the result of the current state of the financial markets, which indicates a preference for riskier assets. The decline in yields on U.S. Treasury securities, on the other hand, is causing Gold to defy this trend today.
In order to reach 4.248%, the benchmark 10-year note experienced a decline of three and a half basis points, which resulted in the majority of its gains being lost. Investors responded positively by lowering their expectations for interest rate cuts and anticipating a decrease of 93 basis points by the end of the year. This occurred despite the fact that executives from the Federal Reserve recently expressed a more cautious stance.
The Falling Value of the U.S. dollar and Lower U.S. rates slowed the Rise in Gold Prices
- The minutes from the January meeting of the Federal Open Market Committee (FOMC) revealed that policymakers are still reluctant to reduce interest rates, opting for a careful strategy in light of the recent increase in inflationary indicators. While recognizing that the dangers of fulfilling both objectives are more evenly distributed, they would continue to monitor inflation closely. This comes with the downside of economic risks being skewed in a negative direction.
- Additionally, the labor market in the U.S. continues to show strength following the most recent report on Initial Jobless Claims, which revealed a decrease in the number of Americans seeking unemployment benefits.
- In February, business activity in the U.S. showed signs of slowing down, according to S&P Global. The service and composite indices increased compared to the previous month, while manufacturing saw a surprising rise, moving out of contraction.
- According to the CME FedWatch Tool, traders are anticipating the Federal Reserve will implement a 25 basis points rate reduction in June 2024.
- Investors anticipate a reduction of 95 basis points in interest rates throughout 2024.
- The U.S. Dollar Index, which monitors the U.S. Dollar’s performance against a selection of six primary currencies, is presently trading close to 103.90, showing a decrease of 0.04%.
- According to John Williams, the President of the Federal Reserve Bank of New York, the Fed is set to reduce interest rates “later this year.” He observed that the advancement of inflation towards the central bank’s 2% goal might be uneven, but in general, the economy is moving “in the correct direction.”
Gold Has Surpassed the 50-day Simple Moving Average and Is Aiming for $2,050
Gold has transitioned to a neutral to slightly positive outlook as it surpasses the 50-day Simple Moving Average (SMA) at $2,033.75, potentially paving the way to test the $2,050 level. After surpassing those levels, the following targets to aim for are the peak on February 1 at $2,065.60, followed by the high on December 28 at $2,088.48.
Conversely, if sellers push the XAU/USD spot price under the 50-day SMA, it may lead to a test of the October 27 daily high, now acting as support at $2,009.42. If the former is violated, it will reveal the 100-day Simple Moving Average at $2,002.05. The upcoming target is the low point on December 13 at $1,973.13, then the 200-day Simple Moving Average at $1,965.86.