GOLD Analysis
Afternoon: Gold Surges to Two-Month High Amid Rate-Cut Expectations and Weaker Economic Data
Highlights:
- Gold surged to $2,715 per ounce, the highest level in two months, on Fed rate-cut expectations.
- Weak US retail sales and rising unemployment claims signal economic slowdown, boosting bullion demand.
- UK and Eurozone rate-cut expectations further enhance gold’s bullish momentum.
Overview:
Gold prices soared to $2,715 per ounce, marking their highest level in two months, as expectations of interest rate cuts by the Federal Reserve and other central banks gained traction. A combination of weaker economic data and easing inflationary pressures has bolstered the case for reduced monetary tightening, fueling the rally in non-yielding assets like gold.
Macroeconomic Drivers Supporting Gold Prices
- Weaker US Economic Data:
December retail sales growth came in below expectations, while initial unemployment claims surged in January. These signs of economic slowdown align with the Federal Reserve’s cautious stance, reinforcing the likelihood of interest rate cuts in 2024.
- Global Rate-Cut Expectations:
A weaker GDP print in the UK and declining energy prices in the Eurozone—despite tighter natural gas supplies—further support the case for lower interest rates globally. Reduced monetary restrictions lower the opportunity cost of holding gold, enhancing its appeal.
- Safe-Haven Demand Eases Amid Middle East Developments:
The cease-fire and hostage agreement between Israel and Hamas have diminished immediate geopolitical risks, slightly tempering safe-haven demand but not enough to offset the bullish impact of macroeconomic factors.
Market Outlook and Technical Analysis
- Support Levels: Gold is expected to find strong support at $2,690, with buying interest likely around these levels if prices pull back.
- Resistance Levels: On the upside, resistance is noted at $2,735, where profit-taking may occur.
- MCX Levels: For Indian markets, support and resistance levels are observed at ₹78,800 and ₹79,650, respectively.
Actionable Strategy
Traders are advised to consider buying on dips around $2,705, targeting $2,728, with a stop loss below $2,690. This strategy leverages the current bullish momentum while managing downside risks effectively.
Key Economic Data to Watch
Upcoming releases that could influence gold prices include:
- US Zone: Building Permits, Housing Starts, Capacity Utilization Rate, and Industrial Production (m/m).
- Eurozone: Current Account and Final Core CPI (y/y).
Conclusion
Gold’s ascent to a two-month high reflects its strong appeal in a landscape of easing monetary policies, weakening economic data, and diminishing inflationary pressures. While geopolitical risks have momentarily eased, the focus remains on central bank actions and macroeconomic indicators. Investors are poised to capitalize on the metal’s resilience as a hedge against economic uncertainty and a declining dollar.
Support and Resistance Levels:
