GOLD (XAU/USD) PRICE FORECAST: US Inflation in Line with Estimates but MoM CPI Rises, DXY Ticks Higher
Gold prices attempted a recovery today and reached a high of around $1997/oz before sellers took control in the aftermath of the US CPI release. The CPI print appeared positive at first glance but the uptick in the monthly inflation figures mean the Fed are unlikely to commit to any rate cuts at tomorrow’s meeting. This saw the DXY rise temporarily and push Gold prices back to a key support area.
As geopolitical tensions remain on a knife edge, gold is likely to remain supported and attract buyers on significant dips. The appeal of the precious metal remains high, and with the inevitability of rate cuts at some point in 2024, gold will likely remain above the $1800/oz mark for the foreseeable future.
Heading into the FOMC meeting tomorrow, all eyes will be fixed on the Economic Projections and how they might differ from the current market expectations. Comments by Fed Chair Powell will also hold a significant amount of sway tomorrow, and some form of pushback by the Fed Chair is expected, regardless of what the Economic Projections reveal.
The immediate direction for gold prices will depend on the reaction of the US Dollar and US Yields to the meeting tomorrow. Any significant deviations between market participants and the Fed could be the catalyst needed for Gold’s next move. Pushback from the Fed and significant repricing regarding rate cuts in 2024 could give the US Dollar legs and push Gold closer to the $1950/oz support area. If the Fed adopts a more dovish approach and hints at rate cuts in 2024 in line with current market expectations, then we could see gold bulls rejuvenated and push back above the $2000/oz. All in all, the US Dollar still holds the key as markets wait with bated breath.
TECHNICAL OUTLOOK
GOLD
From a technical perspective, Gold is resting in a key support area of its own heading into tomorrow’s FOMC meeting. The range between $1977-$1984 remains a key area as it has consistently shifted between support and resistance of late. The daily candle today does not inspire confidence, but the failure to print a fresh low may be indicative of the buying pressure still evident in the precious metal. A break lower from here faces a raft of support before the psychological $1950 area is reached, with the 50-day MA resting around the $1968 support area while the 200-day MA rests just above the $1950 handle. Below this, the $1940 and $1930 handle both provide some support and could come into play should we see an aggressive selloff tomorrow. A push higher here needs to gain acceptance back above the $2000 an ounce mark if the precious metal is looking to kick on and head back towards the recently created all-time high.
SILVER
The technical outlook for silver is intriguing as the price rests at a key inflection point heading into the FOMC meeting. Silver has fallen aggressively from recent highs with 8 consecutive days of losses leading it back to the ascending trendline. This will be the third touch, which would usually lead to a potential bullish pattern and fresh highs above the $26.00. A daily candle close below the $22.00 will see the structure broken and invalidate a bullish continuation and could see recent lows at the $20.50 mark come into play over the coming weeks. This just highlights the importance of the FOMC meeting tomorrow.
IG CLIENT SENTIMENT
Insights from the IG Client Sentiment indicate that retail traders are overwhelmingly long on Silver with 89% of the retail traders holding long positions. Given the contrarian view to crowd sentiment taken at DailyFX, this is a sign that Silver may break through the trendline and change structure.
ADDITIONAL INSIGHT
The current geopolitical tensions and the uncertainty hovering around the decision of the Federal Reserve on rate cuts keep precious metal like gold and silver in limelight due to their safe-haven appeal. As inflationary pressures continue to persist, gold and silver also remain as assets of choice for many investors looking to hedge against the potential risks associated with currency devaluation and economic uncertainty. Therefore, continued monitoring of the outcomes of events such as the FOMC meeting will continue to play a significant role in shaping the future price movement of gold and silver. Considering the current market dynamics, it is critical to remain vigilant and update trading strategies accordingly.
