Contents
The Gold Price (XAU/USD) has recently encountered a second consecutive day of selling pressure, hovering around the $2,030 mark, marking a nearly 0.30% decline for the day leading into the European session. This shift in dynamics is primarily attributed to a recalibration of investor expectations regarding the Federal Reserve’s policy easing. Let’s delve into the key factors influencing the gold market and explore potential scenarios in this Gold Price Forecast.
Highlights:
- Strong US jobs data reduced expectations for aggressive rate cuts by the Fed, leading to higher bond yields and putting downward pressure on gold prices.
- Despite a stronger dollar due to the jobs report, ongoing tensions in the Middle East and concerns about China’s economy support gold’s safe-haven appeal and limit downside potential.
- Gold needs to stay above $2,028 to avoid further decline towards $2,000. Conversely, breaking above $2,042 could lead to gains towards $2,078. Overall, the near-term direction remains uncertain due to mixed fundamentals.
Federal Reserve’s Impact on Gold price
Investors have adjusted their outlook following the release of robust US employment data on Friday. The better-than-expected Nonfarm Payrolls report, indicating 353K new jobs in January, has led to a reduction in expectations for aggressive rate cuts by the Federal Reserve. The probability of a rate cut in March has dwindled to approximately 15%, significantly down from over 65% the previous month. This has resulted in elevated US Treasury bond yields, exerting downward pressure on the non-yielding gold.
Read more: Gold Prices Await US NFP Report: A Comprehensive Analysis
US Dollar’s Role and Geopolitical Tensions
Despite the US Dollar facing rejection ahead of the 100-day Simple Moving Average, its post-NFP positive momentum has momentarily stalled. This pause could provide some support to the Gold Price. Additionally, geopolitical tensions in the Middle East and concerns about China’s economic growth act as limiting factors on the optimism in equity markets. These uncertainties contribute to the attractiveness of gold as a safe-haven asset.
Upcoming Influencers
Market participants are eagerly awaiting the release of the US ISM Services PMI during the early North American session, anticipating its impact on USD price dynamics and gold prices. Broader risk sentiment, coupled with the mixed fundamental backdrop, suggests a cautious approach in positioning for a near-term direction.
Read more: Market Week Ahead: ISM Services PMI and RBA Rate Decision in Focus
Gold Price Forecast: Technical Analysis
From a technical perspective, a breach below the $2,028-2,027 support may lead to a slide towards the $2,012-2,010 region, with further potential downside to the $2,000 psychological mark. On the flip side, momentum beyond the $2,042 region could face hurdles around $2,054-2,055, with a possible upside target of $2,078-2,079. Oscillators on the daily chart play a pivotal role in determining follow-through buying.
Current Landscape
As of the latest update, Gold Price maintains positive ground during the early Asian session, trading at $2,038, reflecting a 0.12% gain for the day. While the upbeat US jobs report has dampened hopes for a March rate cut, ongoing geopolitical tensions in the Middle East could limit the downside for the precious metal.
Conclusion
In this Gold Price Forecast, the interplay of factors such as Federal Reserve policy shifts, US Dollar movements, and geopolitical tensions shape the trajectory of the gold market. Traders remain vigilant, seeking cues from upcoming economic data and global events to navigate short-term opportunities around the precious metal in an environment of mixed fundamentals and evolving market dynamics.
