Gold Price Resurgence Continues As Investors Count on Fed Rate Cuts

Summary:
• Gold price returned above $2200 as US dollar fundamentals dissipated and investors continued repositioning themselves for Fed rate cuts.

Gold prices climbed further on Wednesday, as buying appetite improved on a calmer US dollar. Spot gold went for $2197 per ounce, while gold contracts went for $2217 per ounce at the COMEX futures market. The commodity’s safe haven status has improved this week on the back of calmer US economic data. Furthermore, the US dollar’s upsurge against major currencies has plateaued, with the DXY reversing downwards from the 104.250 mark.

Gold’s current resurgence is built on a strong market conviction around anticipated three Federal Reserve rate cuts in 2024. That has put a lid on US Treasury yields, and seen some investors take up profits and search for alternative investments. Meanwhile, China has eased buying gold, but the undercurrents remain thanks to a faltering economy.

The Eurozone economy has shown signs of a recovery, with inflation figures showing progress towards the 2% target. That will likely lead to a June interest rate cut by the ECB, providing more tailwinds for the yellow metal. The US dollar got a boost from Durable Goods Orders figure which rose to 1.4% in February, better than the forecast figure of 1.2%. However, the dollar’s upside momentum was curtailed by the decline in the CB Consumer Confidence level to 104.7, in March from February’s 104.8. Furthermore, the figure was well below the forecast 106.9.

The XAUUSD trading pair will find fresh impetus from Thursday when the US Q3 2023 GDP readings are released. In the intervening period, however, there are no high-impact data releases schedule. This could favour gold to remain within its current upward trajectory.

Technical analysis

Gold pivots at 2182, which when read together with the RSI signals control by the buyers. A continuation of this trend is likely to go past the resistance at 2200, and potentially test 2211. However, the downside will likely prevail if the sellers manage to bring action below the 2182 pivot mark. That could break the support at 2174 in extension, invalidating the upward narrative and potentially test the next support at 2169.