Gold prices, which represent the value of gold when compared to the US dollar, didn’t continue to rise after making some small gains in the past two days. Instead, they went down a bit at the beginning of this week, though the decrease wasn’t significant. People who watch the market believe that the Federal Reserve, the central bank of the United States, might not lower interest rates soon. This belief got stronger when the US Personal Consumption Expenditures (PCE) Price Index was released on Friday, showing that inflation is still somewhat high. Also, because the stock market seemed mostly positive, investors were less interested in buying gold, which is often seen as a safe investment during uncertain times.
As for the US Dollar (USD), it encountered a new wave of supply, causing it to reverse its slight gains from Friday when it had reached a low point for the past two weeks. This turnaround happened alongside a strong recovery in the Japanese Yen (JPY), which was boosted by talk of potential government intervention to support it. Additionally, the ongoing conflict between Russia and Ukraine continues to create uncertainty in the world, which helps support gold prices by keeping geopolitical risks in the picture.
Traders are also taking a cautious approach ahead of the important two-day meeting of the Federal Open Market Committee (FOMC), which starts on Tuesday. This meeting is closely watched by investors as it could provide clues about future monetary policy decisions, including interest rates. Moreover, there are significant US economic reports expected at the beginning of the new month, such as the Nonfarm Payrolls (NFP) report, which adds to the incentive for traders to wait on the sidelines before making big moves.
Market Movers Daily Digest: Gold Price Stays Down as Fed Expectations Firm and Risk Sentiment Improves
- The US Bureau of Economic Analysis released data showing that the Personal Consumption Expenditures (PCE) Price Index increased by 0.3% in March, with the yearly rate rising to 2.7% from February’s 2.5%, surpassing the anticipated 2.6% reading.
- The core PCE Price Index, excluding volatile food and energy prices, remained steady at 2.8%, higher than the expected 2.6%, reinforcing expectations of a hawkish stance from the Federal Reserve and putting downward pressure on gold prices.
- Optimism about peace talks between Israel and Hamas in Cairo led to increased investor appetite for riskier assets, diverting flows away from safe-haven gold.
- Despite positive developments, Ukraine’s attacks on Russian oil refineries and its call for more military aid from the US maintained geopolitical tensions, supporting the XAU/USD.
- Persistent evidence of inflation in the US not easing as previously anticipated could benefit gold, traditionally seen as a hedge against inflation, especially with the upcoming two-day FOMC monetary policy meeting.
- Investors await the release of significant US macroeconomic data at the start of the month, notably the Nonfarm Payrolls (NFP) report on Friday, which will provide insights into the labor market’s health.
Technical Analysis: Potential Gold Price Weakness Upon Decisive Break Below $2,320 Pivotal Support
Looking at the technical side of things, last week, gold prices bounced back up after dropping below $2,300. But when they reached around $2,352-2,353, they couldn’t go higher. This area is significant because it’s where the price reached halfway back up from the recent highest point (that’s what the 50% Fibonacci retracement level means), and it’s where the 200-hour Simple Moving Average (SMA) is. After failing to go higher, the price fell again but stopped around $2,320, which is about 23.6% back up from the lowest point. This $2,320 level is now very important. If the price keeps going down and breaks below $2,320 and stays there, it could mean that the price might drop more. It could even go back to around $2,292-2,291, which is where it was last week. If it goes even lower, the next place it might stop is around $2,268-2,265.
Looking at the other side, for those who believe the price of gold will go up (we call them bulls), they should wait until the price goes higher than $2,352-2,353. Once it crosses this level, they might consider making new bets that the price will continue to go up. If that happens, the price could keep going up to around $2,371-2,372. After that, it might even reach $2,400. If the momentum keeps going, it could even go back to its highest point ever, around $2,431-2,432, which it reached earlier this month.
