The gold market showed signs of a slight recovery on Wednesday, bouncing back from minor losses seen in the previous session. The price of the precious metal has risen to $2,061.77. This marks an increase of $2.73 or 0.13 percent. This upward trend is supported by a weakening U.S. dollar (USD). Nonetheless, a rise in Treasury yields is counterbalancing it, limiting the extent of the metal’s potential gains.
The Federal Reserve’s (Fed) stance on interest rate adjustments and the unfolding geopolitical tensions in the Middle East are also key to the gold market’s future. These two usually increase the demand for gold as a safe investment.
Ahead of the release of the minutes from the Fed’s policy meeting, gold price bulls are showing caution. It comes despite a mix of factors that helped gold prices regain momentum on Wednesday, breaking a three-day losing streak. One key factor bolstering gold, a non-yielding asset, is the growing expectation that the Fed may lower interest rates in March.
Further adding to gold’s appeal as a safe-haven asset are the escalating tensions in the Red Sea region and China’s ongoing economic challenges. The official Chinese Purchasing Managers’ Index (PMI) released over the weekend revealed a continued downturn in manufacturing activity, with little sign of recovery at the end of 2023. A private survey on Tuesday also indicated a slight increase in China’s factory activity in December, but overall business confidence for the year remains low.
Traders will likely adopt a wait-and-see approach, staying on the sidelines in anticipation of the crucial FOMC meeting minutes. The market is also attuned to US employment data, including the non-farm payroll (NFP) report. The report shows the total number of jobs added in the US in the past month. It doesn’t include jobs from farms, private homes or non-profits.
These updates can offer crucial insights into the central bank’s future interest rate plans, significantly influencing the gold market’s direction.
Generally optimistic outlook
In 2024, experts predict potential growth for the gold market, especially if the Fed maintains a dovish stance. Specifically, analyst Tim Waterer anticipates the possibility of gold reaching $2,100 per ounce soon. The likelihood of it happening depends on the said economic and geopolitical factors.
The near-term outlook for gold is moderately positive. Expectations of reduced interest rates this year and persistent Middle East conflicts might keep increasing gold prices.
From a technical standpoint, gold trading above its 200-day and 50-day moving averages suggests a bullish market sentiment. How gold reacts to the key support and resistance point at $2,067 is essential for predicting its future price trend.
According to analysts, the market attitude is generally optimistic. Additionally, there’s a chance for gold price increases if the yellow metal maintains its position above these averages and surpasses the said key resistance points.
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