Gold prices remained steady on Thursday, with market attention focused on upcoming U.S. economic data that could influence the Federal Reserve’s next interest rate decision.
At 10:48 GMT, Gold (XAU/USD) is trading $2336.20, down $1.945 or -0.08%.
The U.S. dollar hit a two-week high against major currencies, buoyed by a bond market rout that increased demand for safe-haven assets. A rise in long-term Treasury yields, driven by robust economic data and poorly received bond auctions, has pressured global equities and bolstered the dollar. Expectations for immediate Federal Reserve rate cuts have diminished amid stubborn inflation and rising consumer sentiment.
Investors are increasingly expecting the Federal Reserve to maintain higher interest rates for an extended period, which raises the opportunity costs of holding non-yielding assets like gold.
On Thursday, the 10-year Treasury yield fell by 3 basis points to 4.594%, and the 2-year yield dropped to 4.966%. These movements come as traders await key economic indicators, including the personal consumption expenditures (PCE) price index, personal spending, income data, and the second estimate of the first-quarter GDP. The PCE price index, scheduled for release on Friday, is closely watched as the Federal Reserve’s preferred measure of inflation.
Hawkish comments from Fed officials have adjusted market expectations, with fewer rate cuts anticipated in 2024. According to the CME FedWatch Tool, there’s a 48% chance of a rate cut by September. Revised U.S. GDP figures and weekly jobless claims data are due later today, which will be followed by the critical PCE price index data on Friday. Minneapolis Fed President Neel Kashkari has recently suggested that rate cuts may not occur soon, as persistent inflation demands more positive data before monetary policy easing.
Gold has seen strong demand due to geopolitical instability and economic uncertainty, with significant purchases by states bolstering prices. However, illegal gold smuggling from Africa, predominantly to the UAE, has surged. Swissaid reports that in 2022 alone, 435 tonnes of gold worth over $30 billion were smuggled out of Africa, with the UAE receiving 405 tonnes. Over the past decade, more than 2,500 tonnes valued at over $115 billion were smuggled to the UAE.
Given the strong safe-haven demand for gold, coupled with geopolitical tensions and economic uncertainties, gold prices are likely to remain supported in the near term. However, the potential for higher-for-longer interest rates presents downside risks. Therefore, the market outlook for gold is cautiously bullish, pending further clarity from upcoming economic data.
Gold (XAU/USD) is trading flat-to-lower on Thursday, while hovering just above the 50-day moving average at $2324.11. This intermediate trend indicator has been providing support and direction since February 29 so crossing to the weakside of it could signal a major shift in sentiment.
Short-sellers and the triggering of sell stops could fuel a plunge in the market with $2277.34 the minimum downside target over the near-term.
On the upside, resistance is being provided by a short-term pivot at $2387.795.
James Hyerczyk is a U.S. based seasoned technical analyst and educator with over 40 years of experience in market analysis and trading, specializing in chart patterns and price movement. He is the author of two books on technical analysis and has a background in both futures and stock markets.