Gold Prices Edge Higher Amid Fed Rate Cut Expectations and Geopolitical Tensions

Gold price

January 2, 2024

New Delhi, India

Gold Prices

Gold prices started the new year on a positive note, gaining over 0.50% on the first trading day of 2024, currently hovering around $2,075. This upward momentum is attributed to a combination of factors shaping the market dynamics.

Fed Rate Cut Bets Boost Gold:

Investors are increasingly anticipating a soft landing for the economy in 2024, with expectations of the Federal Reserve initiating interest rate cuts as early as March. The CME’s FedWatch tool indicates an 85% chance of a rate cut in March and a cumulative 150 basis points cut by year-end, bolstering gold’s appeal as a safe-haven asset.

Geopolitical Risks Drive Demand:

Tensions in geopolitical hotspots like Ukraine and the Middle East continue to influence the gold market. Recent US strikes against the Iran-backed Houthi group and concerns about China’s economic woes add to the demand for the precious metal as a hedge against uncertainty.

Also Read: India’s Sokol Crude Imports Hit 11-Month Low Amid Payment Woes

Rising US Bond Yields and Dollar Strength Pose Challenges:

While gold remains well-supported, challenges arise from the strengthening US Dollar, fueled by a rise in US Treasury bond yields. This dynamic may cap further gains for gold, and traders are keeping a close eye on key economic indicators.

Technical Analysis:

From a technical perspective, gold faces immediate resistance around the $2,077-2,078 region, followed by the multi-week high at $2,088. Breaking through these levels could pave the way for a move towards $2,100 and a potential retest of the record peak at $2,144. On the downside, support lies at $2,060-2,058, with further levels at $2,048 and $2,040.

Market Outlook and What to Watch:

Traders are exhibiting caution and await the release of the FOMC meeting minutes, scheduled for Wednesday, along with key US economic releases, including the Nonfarm-Payrolls report on Friday. These events are likely to provide meaningful impetus for gold’s next move.

In conclusion, gold prices remain influenced by a delicate balance of factors, and market participants are navigating through the interplay of Fed expectations, geopolitical risks, and technical chart patterns. As the week progresses, all eyes are on key events that could shape the trajectory of gold in the early days of 2024.

Also Read: NSE Shifts Bank Nifty Expiry Day to Wednesdays Starting March 1, 2024


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