- Gold price pulls away from a fresh multi-month high amid modest US dollar strength.
- Expectations of lower rate hikes from the Federal Reserve and fears of a recession should help limit losses.
- Investors look forward to advanced US GDP.
The price of Gold (XAU/USD) pulls back from near the $1,950 level, or the highest level since April 2022 touched this Thursday, and extends its decline during the first half of the European session. XAU/USD falls to a new daily low, around the $1,935 area in the last hour, and for now, it seems to have broken a three-day winning streak.
The modest strength of the dollar affects the price of gold
US dollar (USD) gains some positive traction and off an eight-month low before the United States (US) fourth-quarter Gross Domestic Product (GDP) advance report. This turns out to be a key factor prompting traders to lighten their bets around the price of gold, denominated in US dollars. However, the intraday rally in the dollar is likely to remain limited on the prospect of less aggressive monetary policy tightening by the Federal Reserve (Fed).
Expectations for lower rate hikes by the Federal Reserve will provide support
In fact, the markets seem convinced that the US central bank will soften your hard-line stance given the signs of easing of inflationary pressures. In addition, the CME’s FedWatch tool points to more than a 90% probability of a minor rate hike, of 25 basis points, at the next Federal Open Market Committee (FOMC) meeting that concludes on February 1. This keeps US Treasury yields in check, which in turn could curb new positions by dollar bulls and support the gold price.
Recession fears should limit gold price losses
Apart of this, the cautious feeling it could also help limit the fall in the safe-haven XAU/USD for now. Concerns about a deeper global economic downturn continue to weigh on investor sentiment, evidenced by a generally softer tone around equity markets. Traders are also looking reticent and may prefer to stay on the sidelines awaiting key US macro data on Thursday: fourth quarter GDP, durable goods orders and new home sales.
Focus remains on key US macroeconomic data
Market participants will also be faced this week with the Friday release of the Core Personal Consumption Price Index (PCE), the Fed’s preferred inflation gauge. This data should influence the US central bank’s interest rate strategy, which in turn will boost demand for the dollar and provide a significant boost to the price of gold. However, attention will remain focused on the outcome of the two-day meeting of the FOMCwhich will be announced next Wednesday.
Gold Price Technical Outlook
From a technical point of view, the trend is still up and any further decline is likely to find good support near the level of $1,920. Below is the support area of $1,911-$1,910ahead of the round level of $1,900. The latter should act as a turning point, which if broken decisively could shift the short-term bias in favor of the bears and pave the way for a deeper corrective pullback.
On the other hand, the maximum of several months, around the zone of $1,949 touched earlier this Thursday, now becomes an immediate hurdle, above which the price of gold could rise to the region of the $1,969-$1,970. The momentum could extend further, allowing the bulls to break through intermediate resistance near the $1,980 area and recapture the psychological level of the $2,000 for the first time since March 2022.
Gold Key Levels to Watch
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.
