GOLD Analysis
Afternoon Session: Gold Surges to Record High Amid Economic Turbulence and Fed Rate Cut Speculations, will it enter to uncharted area?
Highlights:
- Gold hits record high on US unemployment spike and rate cut expectations.
- Bullish traders adjust positions ahead of US consumer inflation figures.
- Technical analysis indicates support at $2,154 and potential breakout above $2,200.
Overview:
The gold market experienced a historic surge on Friday, reaching a new record high, triggered by a spike in the US unemployment rate. The surge in gold prices is driven by growing expectations of a rate cut by the Federal Reserve in June. This report delves into the factors influencing the gold market and the key events shaping its trajectory.
Market Dynamics:
The US Dollar rebounded from its mid-January lows, momentarily halting gold's momentum near the $2,200 mark. Bullish traders, recognizing overbought conditions on the daily chart, are adjusting their positions, especially in anticipation of the upcoming US consumer inflation figures scheduled for release on Tuesday. The impending US CPI report is expected to influence market expectations regarding the Fed's rate-cut path, impacting both USD demand and gold prices.
US Economic Indicators:
The US unemployment rate rose to a two-year high, fueling speculation of a June rate cut by the Federal Reserve and contributing to the upward trajectory of gold prices. While the US economy added a robust 275,000 new jobs in February, surpassing the estimated 200,000, the previous month's reading was revised downward. Additionally, wage inflation, measured by Average Hourly Earnings, increased by 4.3% annually, falling short of expectations and January's growth of 4.4%.
Market Outlook:
The possibility of a May rate cut by the Federal Reserve has increased to around 30% following the release of the jobs report, with June still considered the most likely timing. Geopolitical tensions and concerns about a global economic slowdown in 2024 are further driving investors towards the safe-haven appeal of gold. Traders are eagerly awaiting the release of US consumer inflation figures on Tuesday for additional insights into the Fed's rate-cut path.
Technical Analysis:
The breakout through the previous record high at the $2,144 area supports bullish traders, but caution is advised as the Relative Strength Index (RSI) on the daily chart indicates overbought conditions. This suggests the potential for near-term consolidation or a pullback. Key support is anticipated near Friday's swing low at the $2,154 region, with a pivotal intraday point identified at $2,154. A break below this level could lead to technical selling, targeting the $2,125 support and the $2,100 level. On the upside, bulls may await a move above $2,200 for further gains, potentially propelling gold into uncharted territory above the $2,200 mark.
Conclusion:
The current landscape of economic uncertainties, coupled with the likelihood of a Fed rate cut, has propelled gold to unprecedented highs. Investors are closely monitoring key economic indicators and geopolitical developments for clues on the future trajectory of gold prices. As the market remains dynamic, a cautious approach is advisable, considering both fundamental factors and technical indicators to navigate potential shifts in gold's bullish trend.
Support and Resistance Levels:
