The price of Gold is expected to drop below $1,850 by the end of the week, losing around 1.60%. The US CPI and PPI numbers have markets again concerned about a hawkish Federal Reserve.
Data on Retail Sales and Jobless Claims are strong, demonstrating the strength of the American economy. Investors predict that by July 2023, the Federal Funds Rates will be higher than the 5.0% mark. In the wake of recent US economic statistics, which soured the mood on more Federal Reserve (Fed) tightening expectations, gold spot price fell for the third day in a row, down around 0.65%. The XAU/USD currency pair is now trading at $1,838.70.
Federal Reserve officials’ hawkish remarks are justified by the rising cost of living in the United States. Due to risk aversion, American stocks are now trading at a loss. On Saint Valentine’s Day, economic statistics showed that inflationary pressures in the US had increased. The US Consumer Price Index for January fell short of readings from the previous month, but the data outperformed expectations.
Regarding inflation, the PPI statistics from last Thursday increased in the monthly, headline, and core readings.
In light of this context, the US Federal Reserve’s (Fed) work in combating inflation still needs to be completed. A message was reaffirmed by Fed officials on Thursday, including James Bullard of the St. Louis Fed and Loretta Mester of the Cleveland Fed. Overall, it’s not suitable for Gold.
American consumers are continuing to spend thanks to the job situation. Further evidence of a strong US economy came from retail sales, which unexpectedly increased by 3.0% after contracting for two consecutive months compared to projections of 1.8%. This gave the Fed greater room to raise interest rates going forward.
Initial Jobless Claims climbed by 194K for the week ending February 11, less than the previous week’s 196K and less than the 200K predicted by economists, according to the US Bureau of Labor Statistics (BLS).
Investors anticipate that the Fed will raise interest rates by over 5.30%. As the tightening cycle continues, investors have started to reassess how far the Fed will boost rates.
According to money market futures, Federal Fund Rates (FFR) is predicted to rise beyond 5.3% in July, up from 4.9% only a few weeks ago. As a result, although decreasing throughout the session, the US 10-year benchmark note rate increased by ten basis points to 3.838%.
The US Dollar Index (DXY), up 0.44% week over week and back over the 104.00 level, benefitted from the increase in rates.
Technical Examination of Gold
After a low of $1,818.97, the price of gold recently found relief at the 100-day Exponential Moving Average (EMA) at $1,819.49 as buyers entered the market and drove prices upward.
The 50-day EMA, around $1,854.27, which acts as a strong resistance barrier, might see sellers enter the market even if the gold price is still neutral to upward inclined. But, a daily close above the daily high that turned into support on December 27 at $1,833.29 might open the door for consolidation in the $1,830-$1,850 range. If not, a bearish move toward the 100-day EMA is anticipated.
