Gold price maintained strength, starting the day on a high note by reaching $2,200 overnight. However, as the day progressed, prices experienced a slight dip but remained in positive territory, ending at $2,177. The US Dollar gained momentum at the opening of Wall Street, which contributed to this dip. Despite this, the drop in US Treasury yields provided support, allowing gold to maintain its gains. Overall, gold prices showed a 0.31% increase, reflecting stability in the market.
Impact of the US Dollar Index and Treasury Yields on Gold
The US Dollar Index (DXY), which measures the dollar’s performance against other major currencies, held steady at 104.30. This stability posed a challenge for gold, which traditionally does not offer interest. However, a slight decline in the US 10-year Treasury bond yield, falling by one basis point to 4.243%, provided the necessary support for gold prices to remain buoyant.
Analysis of US Economic Data
Recent US economic data revealed that Durable Goods Orders surged to their highest level since 2022, a sign of robust economic activity. However, this was contrasted by a dip in Consumer Confidence, as reported by the Conference Board, which hit its lowest level in four months in March. This mixed economic data influenced market sentiment, with gold benefitting from the weaker consumer confidence figures.
Market Movements: Gold Advances Amid Strong Durable Goods Orders
In February, US Durable Goods Orders increased by 1.4% from the previous month, surpassing expectations of a 1.1% rise. This recovery follows a decline of 0.9% in January, showcasing a positive trend. Core Durable Goods Orders, excluding volatile items, also rose by 0.4%, a significant improvement from January’s -0.3%, aligning with market expectations.
Despite the positive data on Durable Goods Orders, the Conference Board reported a slight decline in American consumer confidence, dropping from a revised 104.8 in February to 104.7 in March. The dip is attributed to rising prices and higher borrowing costs, which could impact future economic growth.
Federal Reserve Outlook on Rate Cuts
Federal Reserve officials are currently debating potential interest rate cuts, with differing opinions within the Federal Open Market Committee (FOMC). Atlanta Fed President Raphael Bostic anticipates one rate cut in 2024, while Fed Governor Lisa Cook warns against premature rate cuts due to inflation concerns. On the other hand, Chicago Fed President Austan Goolsbee expects three rate cuts but emphasizes the need for clear evidence of declining inflation before proceeding.
Money market traders predict a 70% probability that the Federal Reserve will implement a 0.25% rate cut, potentially setting the federal funds rate (FFR) between 5.00% and 5.25%.
Key Economic Indicator: Core PCE Price Index
Gold traders are closely monitoring the upcoming release of the Federal Reserve’s preferred inflation gauge, the Core Personal Consumption Expenditure (PCE) Price Index. The index is projected to increase by 2.8% year-over-year in February, with a monthly growth rate slowing from 0.4% to 0.3%. This data will be crucial in shaping the Federal Reserve’s next moves.
Technical Analysis: Gold Price and Market Trends
Gold prices recently dipped to approximately $2,167 before recovering towards the $2,170 level. The Relative Strength Index (RSI) showed an upward trend, indicating potential bullish momentum. However, for this uptrend to sustain, buyers need to push gold prices above the $2,200 mark, which could lead to a retest of the all-time high at $2,223.
If sellers gain control and push prices below the critical support level of $2,146, a further sell-off could drive gold prices towards $2,100. The next major support would be the December 28 high at $2,088.
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