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Gold prices in 2024 (XAU/USD) experienced a notable upswing on Tuesday, primarily propelled by mounting expectations of Federal Reserve rate cuts anticipated in 2024. Investors are closely monitoring upcoming economic data, seeking additional insights into the potential trajectory of U.S. interest rates. The XAU/USD pair concluded its latest trading session at 2075.82, marking a 0.62% increase.
Highlights
- Gold prices in 2024 rose notably on Tuesday, driven by mounting expectations of Federal Reserve rate cuts.
- The stability of the U.S. dollar is a key factor influencing gold prices, with traders assessing the likelihood of substantial interest rate reductions by the Federal Reserve.
- The Federal Reserve surprised markets with a dovish stance in its December policy meeting, projecting a 75 basis point reduction in 2024.
- Geopolitical tensions in the Middle East, especially the recent naval clash in the Red Sea, have heightened market concerns. Gold’s appeal as a safe-haven asset has increased amid rising risks of a broader regional conflict.
US Dollar and Federal Reserve Impact
The stability of the U.S. dollar has been a focal point as traders assess the likelihood of substantial interest rate reductions by the Federal Reserve in the upcoming year. The dollar index exhibited modest gains, reflecting a shift in market sentiment towards potential rate cuts. Traders are eagerly anticipating a move by the Fed, with the CME FedWatch tool indicating an 86% probability of rate cuts commencing from March.
Fed’s Dovish Stance Expected to Boost Gold Prices in 2024
The Federal Reserve surprised markets with its unexpectedly dovish stance during its December policy meeting, projecting a 75 basis point reduction in 2024. This stands in contrast to the positions of other central banks such as the European Central Bank (ECB) and the Bank of England (BoE). The release of the December Fed meeting minutes and economic reports on job openings and nonfarm payrolls this week is expected to yield crucial insights into the central bank’s decision-making process concerning interest rates.
Middle East Tensions Fuel Safe-Haven Demand
Geopolitical tensions in the Middle East, particularly the recent naval clash involving U.S. forces and Iran-backed militants in the Red Sea, have heightened market concerns. These events are amplifying gold’s attractiveness as a safe-haven asset amid escalating risks of a broader regional conflict.
Gold Prices in 2024: Technical Analysis
From a technical analysis standpoint, the daily Gold (XAU/USD) chart reveals that gold is currently trading at $2075.29, positioned above both the 200-day ($1960.99) and 50-day ($2006.97) moving averages, indicating bullish sentiment. The current price hovers around the minor support and resistance level at $2067.00, serving as a pivotal point. A breach of this level could either confirm sustained bullishness or suggest a potential reversal if broken.
The proximity of the main support at $2009.00 and main resistance at $2149.00 establishes a range for conceivably volatile short-term price movements. In summary, the short-term market sentiment for gold appears bullish, with a critical focus on the immediate pivot level at $2067.00 to determine market direction.
Read more: 5 reasons to invest in Gold in 2024
Copper prices steady, but weak China data sullies outlook
- Copper prices experienced a modest increase on Tuesday among positive market sentiments regarding heightened demand and tighter copper markets anticipated in 2024. However, this optimism was tempered by data from China, revealing persistent economic challenges in the world’s largest copper importer.
- Copper futures with a March expiration showed a 0.2% rise, reaching $3.8973 per pound, following a 2.1% increase in 2023.
- Official purchasing managers index data from China indicated that manufacturing activity contracted more than anticipated in December, with non-manufacturing activity hovering close to contraction levels. Despite a private survey showing some resilience in the manufacturing sector, overall growth remained subdued, and both employment and inflation failed to show significant improvement in December.
- These readings suggest that business activity in the leading copper-importing nation continued to exhibit weakness, potentially impacting copper demand throughout 2024.
- Despite the current challenges, copper prices are still anticipated to benefit from the growing demand for electric vehicles and green energy. Additionally, tightening supplies are expected due to significant mine closures in Peru and Panama. These factors may contribute to supporting copper prices in the foreseeable future.
Read more: Top Metals to Invest in Beyond Gold
Conclusion
Gold prices in 2024 are driven by expectations of Federal Reserve rate cuts, with the dovish stance, Middle East tensions, and technical indicators contributing to a bullish short-term outlook. Investors are closely watching economic data and Fed decisions for further guidance. Meanwhile, copper prices face challenges from weak China data but are anticipated to benefit from EV demand and supply constraints in the near future.
