Gold prices drop below $2,000 due to a robust US dollar and unexpected inflation data, impacting market trends and forecasts. Key insights on gold’s struggle amid rising Treasury yields and the dollar’s strongest start in a decade.
The US dollar’s gains rose this week after the announcement of a stronger US inflation numbers than expected, which supports the US central bank’s policy remaining dovish for a longer period.
Accordingly, gold prices fell down with losses that reached the support level of $1,989 per ounce, which is the lowest price in two months.
Gold price XAU/USD fell below the psychological level of $2,000 for the first time in 2024, driven by a higher US dollar and higher Treasury yields fueled by hotter than expected US inflation data.
Overall, the price of the yellow metal struggled to build any momentum as the US dollar got off to its best start to a year in over a decade without any obvious triggers, gold prices could head below the $2,000 threshold for a while.
According to gold trading platforms, gold prices have fallen by 3.25% so far this year. As for the price of silver, which is the sister commodity to gold, it rose to about $22 per ounce. In general, the price of the white metal has decreased by more than 8% since the beginning of the year until now.
In general, the crash of gold prices began after the release of the US Consumer Price Index (CPI) report, which was higher than expected in January. As the FX Daily report noted: “According to the Bureau of Labor Statistics (BLS), the annual inflation rate in the United States fell to 3.1% in January, down from 3.4% in December. This was higher than economists’ expectations of 2.9%. On a monthly basis, it rose CPI rose 0.3% higher than expected. Core inflation, which excludes volatile energy and food components, held steady at 3.9% year-on-year, beating market estimates of 3.7%. Core CPI rose 0.4%, also higher than expected Economists amounted to 0.3%.
But worse, the Fed’s preferred super inflation, which consists mostly of labour intensive services with the exception of housing and energy it rose 0.8% and rose about 4% over the year. This has led investors to abandon their hopes of cutting or control U.S. interest rates in upcoming May. Traders are now pricing in the first rate cut at the June FOMC meeting.
Inflation and delayed Reducing interest rates caused turmoil in Wall Street markets , Financial market indexes crashed , while U.S. Treasury and dollar yields rose. The US dollar index (DXY), a measure of the dollar against a basket of other major currencies, reached 105 Overall, the index has risen to nearly 4% since the beginning of the year.
Today’s gold price forecast:
According to the performance on the daily chart above, there has been a significant shift in the performance of the gold price XAU/USD by moving below the psychological level of $2,000 for the ounce and the next level to the top of $1985 for the ounce and from it. Technical indicators will move towards strong saturation levels by selling and I set the level for thinking about buying gold again but without risk as global geopolitical tensions continue to support the demand for gold bullion. Bulls’ control will be restored if prices return to $2025. I still prefer to buy gold from every downward level.
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To effectively engage in this market, it’s imperative to wait for momentum to build before committing to larger positions.
The gold market displayed an initial attempt to rally during Thursday’s trading session, only to surrender those gains and exhibit a sense of indecision.
Presently, it appears that the market is grappling with uncertainty in the lead-up to the Jackson Hole Symposium. This uncertainty could likely result in a session characterized by limited enthusiasm.
The impending speeches from central bank figures like Jerome Powell and Christine Lagarde will undoubtedly guide market sentiment, ultimately leading to a decisive move.
Once this event concludes, a scenario might unfold where follow-through action becomes apparent. The current landscape suggests that the market will continue to experience significant volatility. Breaking above the 50-day Exponential Moving Average (EMA) could signal an opportunity to target the $2000 price level. Conversely, a breach beneath the 200-day EMA might pave the way for a descent towards the $1900 level.
During these dynamics, the market is potentially forming a “double bottom” pattern, which could serve as a precursor to the impending price action. The candlestick pattern observed on Thursday exhibited a notably impulsive nature, a positive sign indicating a potential market turnaround and upward movement. Overall, this market remains exceptionally turbulent, urging cautious consideration of position sizes. It’s important to recognize that the market’s corrections often manifest vigorously, swiftly placing traders in unfavorable positions.
Be Prudent
To effectively engage in this market, it’s imperative to wait for momentum to build before committing to larger positions. Until that juncture is reached, a prudent approach is recommended. While an eventual boost for the gold market seems plausible, the caveat of Jerome Powell’s potential market impact must be kept in mind.
Ultimately, the recent behavior of the gold market reveals its attempt to initiate a rally followed by a hesitant retreat. The forthcoming Jackson Hole Symposium is poised to shape market dynamics, causing the current indecision to culminate in a significant move. Post-event, the market might offer follow-through opportunities, amid the ongoing backdrop of heightened volatility. The interplay between key moving averages suggests potential price targets. The formation of a “double bottom” and the impulsive nature of recent candlesticks further hint at the market’s trajectory. As this market tends to be turbulent, prudence in position sizing is vital. While eventual upward momentum is conceivable, the influence of Jerome Powell on market sentiment remains a factor to watch.
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Despite the market’s inherent fluctuations, the unwavering support and active participation from buyers seem poised to remain a constant.
The current market landscape has traders focusing intently on the 1.09 level, a pivotal juncture that’s steering ongoing market dynamics.
Standing out amidst this is the 50-Day Exponential Moving Average (EMA), a key indicator that sheds light on critical market shifts.
Positioned just slightly below the present market rates, the 1.09 point takes on even greater significance as a foundational support marker for astute traders.
Moreover, the intersection of the 200-Day EMA with an essential uptrend line offers a clear gauge of the broader market’s vitality and momentum.
Euro is Gradually Ascending
Navigating this intricate landscape demands a steady hand, particularly given its inherent volatility. The ongoing circumstances underscore a positive and consistent trajectory for the euro, backed by robust buying interest. However, this ongoing positivity shouldn’t breed complacency. Staying vigilant about crucial market intersections remains vital, as they often provide early signals of potential shifts in market momentum. Despite the market’s inherent fluctuations, the unwavering support and active participation from buyers seem poised to remain a constant. Notably, for those keen on gauging the euro’s enduring power, close attention to US inflation metrics stands as an indispensable tool.
In summation, recent euro movements reflect a gradual ascent, fortified by the dependable 50-Day EMA. The currency’s future vigor hinges on its ability to surmount significant hurdles such as the 1.1050 and 1.1250 thresholds. For traders and market observers alike, grasping essential market intersections while delving into macroeconomic data, particularly the US inflation metrics, emerges as a crucial compass in navigating this intricate terrain.
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