On the midweek market, gold prices went through a significant development, putting the psychological support level of $2,000 per ounce to the test. This event marked the lowest point in a five-week span. Despite this downturn, astute investors didn't shy away; instead, they seized the opportunity, initiating a robust upward movement that resulted in gains of over 1% within a mere two days. This prompts the intriguing question of whether this may be indicative of an impending upward surge in the XAU/USD chart, especially considering the deceleration of the dollar.
In the days leading up to this event, the gold market reacted swiftly to a notable shift in expectations regarding interest rate cuts in the United States for the current year. Just a week ago, the market was anticipating an almost 80% likelihood of the first 25 basis points cut occurring in March. However, as of today, this probability has diminished to a range of 55-57%.
The stance taken by Christopher Waller on Tuesday, cautioning against hasty interest rate cuts by the Federal Reserve, was complemented by similar sentiments expressed by Raphael Bostic from the Atlanta Fed on the following day. Bostic emphasized that excessively swift interest rate cuts by the Federal Reserve could potentially "stir up" inflation indicators.
The rapid transformation in market sentiment had tangible consequences, leading to a substantial increase in the value of the US dollar and simultaneous declines in the gold market. Over the course of just two days, starting from January 16, gold depreciated by almost 2.5%, rebounding from the upper limit of consolidation around $2,050 per ounce.
Despite these fluctuations, the chart managed to defend the psychological support level of $2,000 per ounce, signaling that the baseline scenario remains a re-test around the $2,050.
However, for this re-test to materialize, markets require additional factors supporting the weakening of the dollar. The next crucial pieces of information are expected with the release of GDP and PCE Core data scheduled for January 25 and 26.
As a result, the upcoming week assumes heightened importance, potentially proving decisive for breaking out of the current consolidation. Nonetheless, definitively determining the future direction of prices remains a challenging task.
On one side of the spectrum, analysts from the German metal conglomerate Heraeus are predicting that, due to hawkish statements from Federal Reserve officials, gold might be available for purchase below $2,000 per ounce in January. However, they anticipate a subsequent return to a growth trajectory.
Conversely, the global landscape is rife with various conflicts, creating an environment conducive to the strong appreciation of gold as a safe haven in times of turbulence. This dynamic adds another layer of complexity to the unfolding market scenario.
Comments