• Tue. Apr 23rd, 2024

Price of Gold Moves the Range Play Further Ahead of the Federal Reserve’s Preferred Inflation Gauge

Leon Kramer

ByLeon Kramer

Feb 29, 2024
Price of Gold Moves the Range Play Further Ahead of the Federal Reserve’s Preferred Inflation Gauge

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  • The price of gold is finding it difficult to make significant progress as traders are looking for a new driving force.
  • The Federal Reserve’s prolonged period of elevated interest rates outlook limits the potential gains for the XAU/USD pair.
  • Traders also opt to hold off on making any moves before the US PCE Price Index is released.

The price of gold (XAU/USD) continues to move sideways during the first half of the European session as traders choose to wait for additional signals regarding the Federal Reserve’s potential interest rate adjustments before making new trading decisions. Therefore, all attention will be fixed on the unveiling of the US Personal Consumption Expenditures (PCE) Price Index. If there are indications of persistent inflation, it will strengthen expectations that the Federal Reserve will maintain elevated interest rates for an extended period. Consequently, this is likely to increase the value of the US Dollar (USD) and lead to some downward pressure on gold, which does not pay interest.

Prior to the important data release, there appears to be a lack of enthusiasm from USD bulls who are staying out of the action. This, combined with the careful atmosphere in the stock markets, provides some backing to the Gold price as a safe-haven asset. At the moment, the absence of significant purchases suggests a need for careful consideration before determining if the XAU/USD has established a short-term support level and preparing for a potential continuation of the recent rebound from the $1,984 area, or the year-to-date low reached in February.

The Price of Gold Is Looking Forward to the US Pce Price Index for a New Directional Impulse.

  • Investors are feeling anxious before the important US inflation report, causing them to be cautious with riskier investments and boosting the demand for Gold as a safe-haven asset while the US Dollar slightly decreases.
  • Multiple Federal Reserve officials emphasized on Wednesday the necessity for additional efforts to reduce inflation, enabling the central bank to maintain higher interest rates for an extended period.
  • John Williams, the President of the New York Federal Reserve, announced that the US central bank is planning to start reducing interest rates in 2024. However, this adjustment is expected to happen in the second part of the year due to the inconsistent progress towards the 2% inflation goal.
  • Atlanta Fed President Raphael Bostic expressed his support for maintaining a cautious approach to policy adjustments and emphasized that the central bank is not claiming success in controlling inflation at this point.
  • On a different note, Susan Collins, President of the Boston Fed Bank, mentioned that the central bank is expected to lower interest rates within the year. However, she emphasized the importance of carefully evaluating data before implementing any policy adjustments.
  • The latest report on the US GDP growth, published on Wednesday, indicated that the American economy grew by a 3.2% annualized rate in the fourth quarter, a bit lower than the initially reported 3.3% increase.
  • Meanwhile, the information supported the perspective that the US economy is still strong and optimistic Federal Reserve predictions, but doesn’t offer much to boost the US Dollar.
  • However, the Federal Reserve’s aggressive stance on interest rates could limit any additional upward movement for the precious metal that does not pay interest, especially with the upcoming release of the US Personal Consumption Expenditures (PCE) Price Index.
  • Thursday’s economic calendar in the US includes the publication of Weekly Initial Jobless Claims, the Chicago PMI, and Pending Home Sales. These, in addition to statements from the Federal Reserve, may offer some momentum.

As the Gold Price Continues to Hover Below the $2,040-2,042 Resistance Level, Traders Appear to Be Non-committed

Looking at it technically, if the price manages to stay above the $2,041-2,042 level, it could signal a new opportunity for buyers and push the Gold price up towards the next obstacle around the $2,065 area. Considering that oscillators on the daily chart have recently begun to show positive momentum, there is a possibility for further extension, potentially enabling XAU/USD to target the $2,100 level once again.

Conversely, the bottom reached around $2,025-2,024 from the day before could offer some backing before the 100-day SMA around $2,013-2,012. Next comes the $2,000 psychological level. If breached, it could potentially change the short-term sentiment in favor of bearish traders, leading to a decline in the Gold price towards the $1,984 support level on the way to the crucial 200-day SMA around the $1,968 area.

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Leon Kramer

Leon Kramer

Leon Kramer, a renowned financial author, enlightens Main Forex News readers with his deep understanding of currency markets. His years in global finance, combined with an intuitive grasp of trends, delivers insightful, up-to-the-minute foreign exchange analysis.

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