Gold prices continued their upward trend on Thursday, surging for a second consecutive day. This development builds on a robust recovery from a three-week low near the 50-day Simple Moving Average (SMA) at approximately $1,973.
The precious metal’s positive momentum carried it to a one-week high during the Asian session. Nonetheless, it encountered resistance around the $2,040 supply zone.
Despite facing headwinds from risk-on market sentiment, wherein investors are embracing higher-risk assets, bullish traders find support in the US Federal Reserve (Fed)’s recent dovish shift. Several more issues, including a slowdown in China’s economy, are fueling optimism among traders. All this indicates the potential for further appreciation of the commodity.
On Wednesday, the Fed signaled that they won’t be increasing interest rates, holding the figures within the range of 5.25 percent to 5.5 percent. This range, initially reached in July, represents a 22-year high.
They are also eyeing to potentially cut rates three times in 2024, each by 25 basis points. While Fed Chairman Jerome Powell noted that the door is open for additional likes, he said that “we [are] likely at or near peak for rates.”
Furthermore, policymakers expressed confidence that inflation will reach the desired 2 percent without the US facing an economic downturn. This caused an overnight drop in the yields of US Treasury bonds, prompting widespread selling of the US Dollar (USD). The weakening USD trend persisted on Thursday, providing continuous support for the non-interest-bearing gold prices.
Additionally, analysts also expect that the upcoming monetary policy updates from the Swiss National Bank (SNB), the Bank of England (BoE) and the European Central Bank (ECB) could introduce volatility into the financial markets.
Apart from this, experts also anticipate that the release of US Retail Sales data to heavily influence investor sentiment and market dynamics.
Insights from analysts
Analysts also point out a potential bullish momentum as gold prices edge closer to the $2,040 threshold. Upon closely watching positive oscillators on the daily chart, they forecast a strong upward trend, climbing toward the $2,072 to $2,073 range. The yellow metal could also reclaim the $2,100 price.
In addition, they see the $2,012 to $2,010 horizontal zone as a protective barrier. However, breaching the $2,000 mark raises concerns about a potential decline.
The 50-day Simple Moving Average (SMA) at $1,973-1,972 is also considered a support level. If the price falls to this range, gold prices might find some stability. Below that, the 200-day SMA at $1,950 is another crucial support level. A break below this level could indicate a shift in favor of bearish traders or those who expect prices to fall.
Looking back on the past year, the World Gold Council remarked that the yellow metal “had a strong 2023.” It defied “expectations amid a high-interest rate environment, outperforming commodities, bonds and most stock markets.”
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