The price of gold is moving upward again, approaching the two-week high reached on Wednesday.

On Thursday, the price of gold (XAU/USD) experienced its fourth consecutive day of positive momentum, moving closer to a two-week high of around $2,056 reached the previous day. The weakening US Dollar (USD), influenced by declining US Treasury bond yields, has been advantageous for the precious metal, which does not yield interest. Ongoing geopolitical tensions and concerns about China’s economic challenges have also played a role in supporting gold’s ascent. Despite these factors, the Federal Reserve’s relatively less dovish stance on interest rates could potentially limit the gains in the non-yielding commodity.

Market attention is now focused on Thursday’s busy economic calendar, featuring the release of flash Eurozone consumer inflation figures and the US ISM Manufacturing PMI. Additionally, the Bank of England’s monetary policy decision is anticipated to introduce some market volatility. Factors such as US bond yields, USD price dynamics, and overall risk sentiment will likely contribute to short-term trading opportunities in the gold market. Looking ahead, investors await the release of the highly watched US Nonfarm Payrolls (NFP) report on Friday for further market insights.

The gold price is finding support from several factors, including the decline in US bond yields, a weakening US Dollar (USD), and ongoing geopolitical risks.

On Wednesday, the Federal Reserve indicated its proximity to implementing rate cuts, causing a decline in US Treasury bond yields. This development triggered a fresh wave of selling in the US Dollar and provided support to the Gold price. As anticipated, the Fed chose to keep the main interest-rate target unchanged between 5.25% and 5.5% after a two-day meeting, signaling that the policy rate may have peaked. During the post-meeting press conference, Fed Chair Jerome Powell mentioned that rate cuts could likely commence later in the year but dismissed expectations for such a move in March.

Market expectations for a rate cut in March dropped to approximately 35%, down from over 60% before the Fed decision and nearly 90% a month ago. Concerns persist among investors regarding the escalating conflict in the Middle East potentially leading to a broader war. Coupled with apprehensions about slowing economic growth in China, these factors contribute to the appeal of the safe-haven precious metal.

In a bid to address challenges posed by Houthi rebels, the European Union aims to launch a naval mission in the Red Sea within three weeks to protect cargo ships, thereby alleviating trade disruptions and price increases. A recent private-sector survey revealed steady expansion in China’s manufacturing sector for the third consecutive month in January.

Traders are now turning their attention to upcoming events, including the release of flash Eurozone consumer inflation figures, the Bank of England policy decision, and the US ISM Manufacturing PMI, seeking market direction ahead of the US Nonfarm Payrolls (NFP) report scheduled for Friday.

In technical analysis, the Gold price appears to be on the verge of further appreciation, with a potential breakout above the robust resistance level of $2,040-$2,042 currently in progress.

Looking at the technical aspects, a breakthrough above the $2,040-$2,042 supply zone could serve as a fresh bullish trigger. Additionally, daily chart oscillators are indicating a positive shift, supporting the potential for further upward movements. However, surpassing the overnight swing high, approximately at $2,056, may encounter resistance around the $2,065-$2,066 region, followed by the $2,078-$2,079 zone or the year-to-date peak. Sustained buying momentum could propel the Gold price to target the $2,100 level and advance towards the next significant obstacle near the $2,020 area.

Conversely, the 50-day Simple Moving Average (SMA) at the $2,031-$2,030 range is currently acting as a robust immediate support and a pivotal point. A convincing breach beneath this support might lead the Gold price to the $2,012-$2,010 area, with potential downside movement towards the psychological $2,000 mark. Further selling pressure could shift the bias in favor of bearish traders, exposing the 100-day SMA support around the $1,980 region, before the XAU/USD potentially descends to the critical 200-day SMA in the $1,965-$1,964 range.

Open chat
Can we help you?