Daily Price Outlook
Gold price managed to stop its downward momentum and experienced a slight increase on Tuesday, following a decline in the previous two days. However, the price remained within a limited range as traders awaited crucial U.S. inflation data and upcoming central bank meetings.
As of now, the XAU/USD is hovering around the $1,960 mark, showing a modest gain of over 0.20% for the day.
US Dollar Weakens as Market Expects Pause in Fed’s Monetary Policy Tightening, Boosting Gold Prices
The broad-based US Dollar has been facing pressure and dropped on the day as the market expects the Federal Reserve to pause its monetary policy tightening. This has had a positive impact on the price of Gold.
This can be witnessed by the fact that traders are increasingly anticipating that the Fed will keep interest rates unchanged following their upcoming two-day meeting.
However, the cautious comments from Fed officials have reinforced this sentiment. As a result, the US Dollar lost its strength, providing support for the price of Gold.
Market Awaits Fed’s Decision, Concerns Remain on Inflation and Strong Job Market
Investors were eagerly anticipating the outcome of a highly anticipated two-day Federal Reserve meeting scheduled for Wednesday. Most of them expected the central bank to take a break from increasing interest rates.
However, some concerns were lingering among investors due to the persistently high inflation, which remained above the Federal Reserve’s target of 2%. Besides this, the job market in the U.S.
was showing robust strength. These factors made investors more cautious, as they were wary of any unexpected signals that the Fed might lean towards raising interest rates further.
This week, we can expect interest rate decisions from the Bank of Japan and the European Central Bank. It is worth noting that European Central Bank is likely to increase rates, while the Bank of Japan is expected to keep its policy loose, meaning it won’t make any changes to interest rates.
When interest rates increase, it generally has a negative impact on non-yielding assets like gold. As global monetary conditions tighten, gold is facing new pressure.
Busy Week Ahead with Key Economic Events and Central Bank Meetings
This week is going to be busy, starting with the release of the latest US consumer inflation data. However, the stronger reading could lead to expectations of a more aggressive stance from the Federal Reserve, which will announce its policy decision on Wednesday.
In the meantime, European Central Bank (ECB) is also meeting on Thursday and is expected to increase its benchmark interest rates. The Bank of Japan (BoJ) is likely to maintain its loose policy.
Apart from this, the ongoing concerns about a global economic slowdown, especially in China, might support the safe-haven appeal of gold and discourage major declines.
GOLD Price Chart – Source: Tradingview
Gold – Technical Analysis
Gold is currently experiencing a bullish trend, bouncing off the support level around $1950 and trading around $1963. On the four-hour timeframe, gold has formed a symmetrical triangle pattern, indicating support at $1950 and resistance at $1970.
The metal is consolidating within this range, and a breakout will determine its future price action. If gold breaks above $1970 and closes above this level, it is likely to continue trading on the bullish side, targeting $1985 or higher.
On the other hand, a break below the support level at $1952 could lead to further downside towards the next support levels at around $1938. It is important to monitor this trading range for further price direction.
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