Gold prices (XAU/USD) demonstrated resilience during the early European session on Wednesday, marking the third consecutive day in positive territory. However, substantial upward momentum remains elusive. The metal benefited from a decline in US Treasury bond yields and ongoing concerns about the deepening conflict in the Middle East and China’s economic challenges, reinforcing its status as a safe-haven asset. Despite these factors, a moderate uptick in US Dollar (USD) demand poses a potential constraint on gold’s upside potential.
Market participants are exercising caution and refraining from directional bets ahead of the imminent Federal Open Market Committee (FOMC) policy decision later in the day. The focus is on whether the Federal Reserve (Fed) will maintain its key interest rates or provide signals about potential adjustments. The accompanying monetary policy statement and remarks from Fed Chair Jerome Powell during the post-meeting press conference are anticipated to offer insights into the timing of the first interest rate cut. This information will likely influence USD demand and provide a new catalyst for gold prices.
Key Factors Influencing Gold Prices:
US Treasury Bond Yields and Geopolitical Risks: The yield on the 10-year US government bond hovers near the 4.0% threshold, contributing to gold’s support. Geopolitical risks and China’s economic struggles also play a role.
China’s Economic Data: China’s official Manufacturing PMI improved slightly to 49.2 in January, indicating a fourth consecutive month in contraction. Non-Manufacturing PMI rose to 50.7, offsetting weak domestic recovery and poor external demand.
US Dollar Strength: The USD gains positive traction amid reduced expectations for aggressive Fed policy easing, potentially limiting gold’s upward movement.
US Economic Indicators: The Job Openings and Labor Turnover Survey (JOLTS) revealed an unexpected increase in job openings to 9.02 million in December. The US Consumer Confidence Index surged to 114.8 in January, signaling optimism. The International Monetary Fund upgraded its forecast for US economic growth, suggesting a robust economy that could influence the Fed’s rate-cut decisions.
Investors eagerly await the FOMC policy decision for clues on the timing of the first interest rate cut, providing a new direction for gold prices. Additional data releases, including the ADP report on private-sector employment and Chicago PMI, will impact market sentiment ahead of the central bank event.
Technical Analysis: Gold Price Levels and Potential Trends:
The Gold price contends with a static barrier in the $2,040-2,042 zone, unable to breach it after the overnight attempt. A failure to sustain above this level and a subsequent drop below the 50-day Simple Moving Average (SMA) at $2,030-2,029 could expose support at $2,012-2,010 and the psychological $2,000 mark. A decisive break below $2,000 may trigger bearish momentum, with potential declines towards the 100-day SMA at $1,979-1,978 and the critical 200-day SMA around $1,964.
On the upside, bulls await a breakthrough above the $2,040-2,042 resistance, followed by surpassing the overnight swing high at $2,048-2,049. This would pave the way for a positive move towards the next hurdle near $2,077. With oscillators on the daily chart showing signs of turning positive, a sustained upward move could target the $2,100 round-figure mark.
Investors are advised to monitor these technical levels closely for potential shifts in gold’s trajectory.