Gold prices saw a modest uptick on Monday amidst market apprehension ahead of significant events later in the week, notably the Federal Open Market Committee (FOMC) announcement scheduled for Wednesday. Early afternoon trading in New York witnessed XAU/USD edging up by around 0.2%, finding support around the $2,150 mark.
With the March meeting of the Federal Reserve approaching, expectations are widespread that the central bank will maintain its current policy stance. However, there’s anticipation for potential adjustments in forward guidance and economic projections, given recent disappointing inflation indicators.
Recent Consumer Price Index (CPI) and Producer Price Index (PPI) releases have surprised to the upside, indicating a concerning halt or potential reversal in progress towards disinflation. In response, the Fed might adopt a more cautious approach, delaying any plans for further easing measures and potentially scaling back the number of expected rate cuts for 2024 from three to two quarter-point reductions.
In the event that policymakers signal a shift towards a less dovish stance and opt to delay the easing cycle during the upcoming FOMC meeting, it could lead to a notable uptick in U.S. Treasury yields and the U.S. dollar. This adjustment in interest rate expectations on Wall Street may pose a considerable threat to the ongoing rally in precious metals, potentially triggering a significant downward correction in the sector. As a result, gold could find itself in a precarious position in the days ahead.
Conversely, if the central bank maintains its previous outlook and indicates that it’s nearing a point where it could start reducing borrowing costs, gold may enjoy a more favorable position to resume its upward momentum. However, recent data highlighting potential upside inflation risks suggests that the dovish outcome anticipated by markets might be less likely to materialize.
Here’s the provided data in a table format:
| Longs | Shorts | Open Interest | |
|---|---|---|---|
| Daily Change | +2% | +10% | +6% |
| Weekly Change | 0% | -1% | -1% |
This table outlines the changes in long positions, short positions, and open interest for gold on both a daily and weekly basis.
Gold Price Technical Analysis
After a lackluster performance last week, gold prices stabilized on Monday and bounced back from the support level near $2,150. If the upward momentum gains strength in the coming days, the next challenge could be the trendline resistance at $2,175. A breakthrough above this level would draw attention to the all-time high around $2,195.
On the other hand, if bears regain control and push the prices lower, the initial support to monitor in case of a pullback is at $2,150. Bulls need to defend this level vigorously to prevent a further increase in selling pressure. Failure to hold this support may lead to a decline towards $2,085. Any subsequent losses could shift focus to $2,065.
GOLD PRICE TECHNICAL CHART
(Image Credit: Diego Colman)
Sources: DailyFX