Gold has shown strength this week as it surged to new highs above $2060, currently trading at $2,053. The increase in gold prices is attributed to a rally in bond markets, leading to a decrease in yields on US Treasuries and weakening the dollar. This has made gold more attractive as an inflation hedge.
The recent policy meeting by the Fed signaled a shift to smaller rate hikes, indicating a possible easing of monetary policy if economic conditions do not worsen significantly. Economists predict an addition of 180,000 jobs in the US alongside a slight increase in the unemployment rate, potentially influencing the Fed’s tightening measures.
Despite the slightly contractionary state of the US manufacturing sector, the decline in January has slowed down. If the upcoming jobs data confirms this trend of moderate growth without substantial wage gains, gold could potentially move towards $2100.
From a technical standpoint, the upward momentum in gold is supported by its break above the 20-day moving average and bullish crossover between medium-term averages. Key support is now around $2040, and with bullish momentum on various timeframes, the path of least resistance appears to be on the upside, barring any unexpected event risks.
Additional Insight:
The rally in gold prices due to the weakening dollar and potential easing of monetary policy reflects a broader market sentiment of uncertainty and a search for safe haven assets. The lingering concerns about a possible economic slowdown and stubborn inflation have contributed to the recent surge in gold prices as investors seek to hedge against these risks. The upcoming job and wage growth data will provide further insight into the state of the economy and is likely to impact gold prices in the near term. Furthermore, the technical indicators suggest that the current momentum in gold could continue, highlighting the potential for further price appreciation in the near future.
