- The climb of gold to $2,354 has been moderated by shifting expectations regarding Fed rate cuts, coupled with a robust US jobs report.
- Citi analysts foresee the possibility of gold experiencing additional gains, with projections extending as high as $2,500 in more optimistic scenarios.
- The market’s reassessment of the Federal Reserve’s interest rate strategy indicates a nuanced perspective, reflecting a blend of perspectives.
Gold prices pulled back on Monday after reaching record highs of $2,354 during the mid-North American session. The ongoing rise in the value of the yellow metal persists amidst increased US Treasury yields and reduced prospects for further interest rate cuts by the Federal Reserve (Fed). Despite a stronger-than-anticipated US Nonfarm Payrolls report last Friday, gold continued its ascent, unaffected by the non-yielding nature of the metal. Currently, XAU/USD is trading at $2,327, reflecting a respectable gain of 0.30%.
The primary catalysts behind the surge in gold prices remain expectations of Fed rate cuts and central bank purchases. Meanwhile, major Wall Street banks are revising their forecasts upward. Marketwatch reports that Citi analysts have adjusted their three-month forecast to $2,400, with a more optimistic outlook projecting the precious metal to reach $2,500.
The latest employment report revealed stronger-than-expected job additions and a decrease in the Unemployment Rate. Concurrently, expectations regarding Fed rate cuts are evolving, with investors speculating that the central bank may initiate rate reductions in July rather than June. The likelihood of a rate cut in June stands at 50%, while for July, it increases to 69%.
Despite these speculations, Fed officials maintain an optimistic outlook regarding potential rate cuts but stress the importance of exercising patience in their decision-making process.
Daily digest market movers: Gold trims gains amid high US yields
- The US Department of Labor has announced that Nonfarm Payrolls surged by 303,000 in March, surpassing the expected 200,000 and the previous 270,000. Additionally, the Unemployment Rate experienced a modest decline from 3.9% to 3.8%, while Average Hourly Earnings aligned with consensus predictions. Average Hourly Earnings saw a month-on-month increase of 0.3%, up from 0.2%. Over the twelve months leading to March, earnings rose by the expected 4.1%, slightly lower than the previous 4.3%.
- Heightened geopolitical tensions arise following Israel’s attack on Iran’s embassy in Syria. Iran has vowed retaliation after seven officers were killed, raising concerns about further escalation. Such developments could potentially drive Gold prices upward, with market observers eyeing the $2,350 mark.
- According to the World Gold Consortium, the People’s Bank of China emerged as the largest purchaser of gold, augmenting its reserves by 12 tonnes to a total of 2,257 tonnes.
- Investor attention is now directed towards the imminent release of the US Consumer Price Index (CPI) data for March, scheduled for Wednesday. The inflation figures will provide additional insights into the potential timing for the Federal Reserve to initiate interest rate cuts. Strong indications of price pressure may temper expectations for rate cuts in June, while softer inflation data could stimulate speculation about forthcoming rate reductions.
Technical analysis: Gold’s rally set to continue after dipping to $2,303
Gold’s upward momentum shows no signs of abating as buyers continue to strengthen their position. Despite the Relative Strength Index (RSI) indicating overbought conditions, surpassing the 70.00 level, it remains poised for further gains. Typically, in a strong uptrend, an RSI reading above 80.00 is considered excessively overbought.
Earlier, Gold experienced a brief dip to $2,303 before swiftly resuming its ascent. The initial resistance lies at the previous all-time high of $2,354. Once this barrier is surpassed, the next targets are $2,400 and eventually the $2,500 mark.
Conversely, the first level of support is situated at $2,300. A breach of this level may expose lower support at $2,250, followed by the $2,200 threshold.
