Investors found themselves drawn to gold on Thursday as the price of the precious metal ticked higher during the Asian session, snapping a two-day losing streak from over a one-month low. The softer risk tone and subdued USD price action provided support for gold, which is often viewed as a safe-haven asset. Concerns about military escalation in the Middle East and sustained economic weakness in China also weighed on investors’ sentiment, bolstering gold’s appeal.
However, despite these factors, the likelihood of a Fed rate cut in March has diminished, limiting gold’s potential for further gains. Upbeat US Retail Sales figures released on Wednesday have tempered expectations for an interest rate cut, signaling a resilient US economy that could give the Fed more room to keep rates higher for longer. As market participants await the release of US economic data, including Weekly Initial Jobless Claims and the Philly Fed Manufacturing Index, the future of gold’s price trajectory remains uncertain.
From a technical perspective, the breakdown through the 50-day Simple Moving Average (SMA) support suggests that the path of least resistance for gold is to the downside. While a move upward to the $2,017-2,018 region might prompt some short-covering rally, it still carries the risk of fizzling out quickly. On the other hand, any further decline below the $2,000 psychological mark could lead to a drop towards the December monthly swing low and potentially even deeper losses.
Central banks are behaving in a way that could bolster gold prices, adding 1,136 tonnes of gold worth around $70 billion to their reserves in 2022, marking the highest yearly purchase since records began. This move is particularly notable among central banks in emerging economies such as China, India, and Turkey, indicative of a broader trend towards increasing gold reserves among these institutions.
Gold’s price is influenced by a wide range of factors, including geopolitical instability, recession fears, interest rates, and the strength of the US Dollar. As such, its future movement will be contingent upon how these various factors play out in the coming weeks. While the near-term outlook for gold remains uncertain, it is clear that the precious metal continues to capture the attention of investors around the world.
