Gold price began the week on a strong note, stabilizing around $2,350 during Monday’s trading session. This rise occurred despite a thin market due to holidays in the UK and the US. Gold has rebounded from a recent two-week low of $2,325, driven by declining US Treasury yields and a weakening US dollar.
Factors Driving Gold Prices
Gold’s recent upward movement to $2,354, a 1% increase, reflects the ongoing strength in the market. While strong economic data from the US has reduced hopes of a Federal Reserve policy easing in the near term, it also caused a 3% dip in gold prices last week. Federal Reserve officials have indicated that bringing inflation back to the 2% target will take more time than expected. Although gold is typically viewed as an inflation hedge, rising Treasury yields have placed downward pressure on prices.
Predictions for Gold Prices
UBS analysts foresee continued volatility in gold price, but they anticipate new record highs by the end of this year. A key focus this week will be on April’s Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation metric. Current forecasts predict a 2.8% year-on-year rise in core PCE, with a 0.3% monthly increase in the headline PCE.
Daily Market Digest: Gold Boosted by Weak US Dollar
Gold prices continue to rise, supported by lower US Treasury yields and a weaker dollar. The US 10-year Treasury yield has fallen slightly, and the US Dollar Index (DXY) has dropped to 104.58, reflecting a 0.15% decrease. Additionally, last week’s S&P Global PMIs highlighted growing business activity, further boosting the gold market.
However, investor uncertainty remains, as evidenced by the disappointing US Durable Goods Orders report. The Federal Open Market Committee (FOMC) meeting minutes showed that Fed officials remain unsure of how restrictive monetary policy needs to be and estimate that achieving the 2% inflation goal may take longer than previously expected.
Economic Indicators to Watch
Analysts from BBH note that inflation in the US remains high despite a slight weakening of the labor market, as reflected in the Beige Book released on April 17. Fed funds rate futures suggest only a minimal interest rate cut of 25 basis points for 2024, according to the Chicago Board of Trade (CBOT). This conservative approach by the Federal Reserve could influence future gold price movements.
Technical Analysis: Gold Prices and Key Levels
Technical analysis shows that gold prices are still trending upwards despite briefly dipping below $2,400. The Relative Strength Index (RSI) has turned bullish, signaling potential for further price increases. If gold (XAU/USD) climbs above the $2,350 level, it could challenge $2,400, with targets of $2,450 and possibly $2,500 in view. On the downside, if prices drop below $2,350, bears could push gold down to the May 8 low of $2,303 or the May 3 cycle low of $2,277.
Conclusion
As the gold market remains sensitive to both economic data and Federal Reserve policies, gold prices are expected to continue fluctuating. However, analysts predict potential record highs later this year, especially as investors keep an eye on inflation data and Fed decisions. The upcoming PCE Price Index data will be crucial in determining short-term movements in the gold market.
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