© Reuters.
Investing.com – It continued to climb for the third straight session on Wednesday, as the dollar weakened on data released yesterday, yet gains were capped by fears of increases on the back of soaring global inflation.
Yesterday, US Consumer Confidence was released, which came against expectations, taking away some of the strength it gained from the recently released data regarding a stronger increase in the upcoming meeting.
However, the markets are awaiting this month’s Federal Reserve meeting regarding the next interest rate, which may turn the gold’s bullish rudder downward in the coming days, as the markets price the US Central Bank’s target price to its peak at 5.420% in September, from the current range of 4.50% to 4.75. %. Chances of a rate cut this year have been largely ruled out.
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gold now
It rose 0.4 percent to $1,833.43 an ounce.
US gold futures rose 0.2 percent to $1,840.90.
It fell 0.4 percent to the levels of 104.4 points, which makes gold priced in the US currency accessible to buyers holding other currencies.
In February, the precious metal recorded its worst month since June 2021, after a series of US data indicated the resilience of the economy and the increase in the number of jobs available in the labor market, which raised fears that the US Federal Reserve will continue to raise interest rates to curb inflation.
new peak
“The next stop for gold may be the $1850-1860 region, at which point we will wait for another peak,” said Matt Simpson, senior market analyst at City Index.
He added, “Gold has been oversold in the near term, after finding support at its 200-day exponential moving average, and the US dollar is set to retrace February’s gains.”
Financial markets expect the Fed target rate to peak at 5.420% in September, from the current range of 4.50% to 4.75%. Chances of a rate cut this year have been largely ruled out.
Higher interest rates reduce the attractiveness of gold as a hedge against inflation while raising the opportunity cost of holding a non-yielding asset.
interest forecast
The US Federal Reserve may have to raise the rate to nearly 6%, according to Bank of America’s global research division, because strong consumer demand and a strong US job market could cause inflation to remain strong for a prolonged period of time. This forecast is higher than the 5.4% price estimate by traders by September.
In a note issued on February 27, Bank of America said that aggregate demand must weaken significantly if inflation is to fall to the Fed’s target rate. Normalizing supply chains and a slowdown in the labor market will help this process but not by much – returning to 2% inflation will take longer than expected too!
Bank of America (NYSE:) increased its forecast to raise another quarter of a basis point in June after similar moves through March and May that would bring the maximum interest rate forecast between -5.25%.
Statements by members of the federation
Federal Reserve Governor Philip Jefferson said Monday that he “has no doubt that inflation will quickly return to the Fed’s 2% target.”
“The job market is very strong now with high demand,” Jefferson said. It is important to return to the inflation target of 2% to allow for sustainable economic gains.
He continued: The Fed has a strong desire to do what it takes to bring down inflation. “It will not be easy to get inflation back to 2%, and it may take some time,” he said.
“Inflation remains very high, and recent data — including several strong labor market indicators, as well as faster-than-expected retail sales and producer price inflation — all reinforce my view,” Boston Fed Chair Susan Collins said on Friday. We have more work to do to bring inflation down to the 2% target.”
Markets expect the Fed’s target interest rate to peak at 5.403% in September.
Yesterday’s data
(February) data revealed a recording of 102.9 points against expectations of recording levels of 108.5 points, while the previous reading in January was reduced to 106 points from 107.1 points. Which reversed the direction of gold and the dollar, as gold was walking in the downside range, while the dollar was stable, so that gold turned upward, while the dollar headed downward.
The latest data comes after the statements of the heads and officials of the US Reserve Bank regarding the continuation of the Fed’s hawkish policy in order for the bank to achieve its inflation targets.
This indicator determines the mood of consumers regarding economic conditions. A higher reading indicates higher consumer optimism. When consumers are optimistic, they tend to buy more goods and services, which stimulates the economy. This reading is extracted from a monthly survey in which respondents are asked to rate the economy in the future.
Technical gold
Gold yesterday reached the 200 day EMA, however, the market has bounced higher, probably going towards the 50 day EMA. The $1850 level could be a technical target, given that the 50 day EMA is in the same general vicinity.
However, if the market breaks down below the 200 day EMA, then it is likely that it could go down to the $1800 level. Further decline below this level could lead to a possible decline towards the Fibonacci level of 61.8%, which is currently around the $1750 level. A break down below there could send gold price down significantly, possibly going down to the $1620 level.
