Gold Prices Show Resilience Amidst Fed Policy Uncertainty and Inflation Concerns

gold prices

January 9, 2023

New Delhi, India

Gold Prices XAU/USD

Amidst a dynamic market landscape, gold prices are exhibiting resilience, recovering from a recent multi-week low and attracting buyers. This surge is fueled by a confluence of factors, including a weaker US Dollar, fluctuating inflation expectations, and uncertainty surrounding Federal Reserve (Fed) policy decisions.

Factors Driving Gold Prices:

Weaker US Dollar Boosts Gold: Tuesday saw gold prices gaining traction in the Asian session, distancing itself from a near three-week low. The weaker US Dollar, influenced by a fall in US Consumer Inflation Expectations, is key in supporting the non-yielding yellow metal.

Fed Policy Uncertainty: Investors are recalibrating their expectations for a more aggressive Fed policy easing. Hawkish remarks from some Fed officials have injected uncertainty about the timing of interest rate cuts, supporting elevated US Treasury bond yields.

Market Sentiment and Equity Markets: Positive sentiment in Asian equity markets is contributing to a cautious approach by traders. They are refraining from aggressive bets, waiting for the release of US consumer inflation figures on Thursday for potential cues about future Fed policies.

Fed Officials’ Perspectives:

Atlanta Fed President’s View: Raphael Bostic notes a decline in inflation beyond expectations, advocating for patience in letting existing tight policies work. Bostic envisions two 25 basis points cuts by the end of 2024.

Fed Governor’s Stance: Michelle Bowman sees the current policy stance as sufficiently restrictive. However, she acknowledges potential upside inflation risks, adding uncertainty to the possibility of early interest rate cuts.

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

Technical Analysis and Outlook:

Resistance and Support Levels: From a technical perspective, gold faces resistance near the $2,040 horizontal zone, with support at the overnight swing low. Key support levels include the 50-day Simple Moving Average (SMA) and the psychological $2,000 mark.

Upcoming Targets: Traders are eyeing $2,100 as a critical level for bullish momentum. Downside targets include $1,988-1,986, the December low at $1,973, and a confluence at $1,962 with the 100- and 200-day SMAs.

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In the midst of evolving market dynamics, gold prices are navigating a complex landscape. Traders are closely monitoring inflation data and Fed commentary for potential cues on the next move. The tug-of-war between economic resilience and inflation concerns is likely to keep the gold market on its toes in the coming days.

Also Read: Indian Mutual Fund Industry Surpasses Rs 50 Trillion AUM Milestone in December 2023


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