- Gold price continues to climb higher on Friday and hits a new multi-month high.
- Expectations of lower Fed rate hikes continue to weigh on the dollar and maintain support.
- If it holds above $1,900, the gold price could continue to appreciate.
The price of gold (XAU/USD) moves higher during the European session on Friday and continues to appreciate above the $1,900 level. XAU/USD is now trading up more than 0.35% on the day and is currently sitting just below the $1,910 level, or its highest level since May 2022.
US dollar weakness continues to benefit gold price
The US dollar (USD) remains under pressure near a seven-month low amid a rising acceptance that the Federal Reserve (Fed) will soften its aggressive stance amid signs of easing of price pressures. A weaker dollar turns out to be a key factor that benefits the price of gold, denominated in US dollars. In fact, inflation in the United States, measured by the Consumer Price Index (CPI), fell by 0.1% in December, which is the first drop since May 2020. In addition, the annual rate slowed from 7.1% in November to 6.5%that is, the lowest level since October 2021. In addition, core inflation, which excludes food and energy prices, rose 0.3% in the month, slowing to a year-on-year rate of 5.7% from 6.0 % of November.
Expectations for lower rate hikes by the Federal Reserve provide more support
Markets began pricing in a smaller 25 basis point Fed rate hike in February. Expectations were bolstered by comments from the Philadelphia Fed president, Patrick Harker, according to which increases of 25 basis points will be appropriate in the future. For his part, the president of the Richmond Fed, Thomas Barkin, suggested that it made sense to be more cautious while the central bank works to reduce inflation. This dwarfs the more hawkish comments of the St. Louis Fed president, James Bullard, who reaffirmed that rates would be above 5% by the end of 2023. However, the prospect of less aggressive monetary policy tightening by the Fed keeps US Treasury yields near multi-week lows and provides further support for the price of gold, which does not generate yields.
Technical purchases contribute to the current positive trend.
Apart of this, the prevailing caution in the markets, amid concerns about a deeper global economic downturn, supports the safe haven gold price. This, along with some technical buys above the $1,900 level, contributes to the last bullish movement of the last hour. Nevertheless, Fundamental and technical conditions support prospects for additional near-term earnings for the XAU/USD. Market participants are now looking forward to the US economic agenda, with the release of the Michigan Preliminary Consumer Sentiment Index later in the American session. Traders will continue to monitor US bond yields and broader market risk sentiment for some short-term opportunities.
Gold Price Technical Outlook
From a technical point of view, some continuation buying beyond the zone of the $1,910 will validate a new bullish break and will raise the price of gold to the horizontal zone of the $1,920. The momentum could spread further towards the next relevant obstacle near the zone of $1,935-$1,936. On the other hand, any significant pullback below the level of $1,900 could attract new buyers near the area of $1,885-$1,880. This, in turn, would help limit the decline near the level of $1,865 or the weekly minimum. A convincing break below this last level could shift the short-term bias in favor of the bears and trigger aggressive selling around XAU/USD.
gold key levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
