Steady at $2038/oz ahead of US PCE data. Monthly loss expected amid strong dollar, high Treasury yields. Market eyes key resistance at $2055, $2070.
- During the middle of this week’s trading, gold futures stabilized, as investors prepare for US inflation data favored by the Federal Reserve on Thursday.
- Overall, gold is struggling to gain any momentum and is on track for a monthly loss.
- A combination of a strong US dollar and rising Treasury yields has weighed on the price of the yellow metal.
- Today, the gold price is stable around the $2038 level per ounce at the time of writing the analysis. Ultimately, gold prices are on track to lose 0.8% in February and have fallen 1.4% since the start of 2024.
In the same performance, silver prices, the sister commodity to gold, continued to decline to below $23 per ounce in the middle of the week. Conventionally, the price of the white metal is preparing for a monthly decline of 2%, in addition to its loss from the beginning of the year 2024 until now by 6%. Overall, financial markets are combing through the second Q4 GDP estimate, which experts say was a non-event as the revisions were tepid. So far, the October GDP reading has shown 3.2%, with revisions due to higher government and consumer spending and lower non-resident private investment.
In other mid-week economic data, the US 30-year mortgage rate remained relatively unchanged at above 7%. Thus, this resulted in mortgage applications falling by 5.6% for the fourth week in a row. In addition, retail inventories excluding automobiles rose 0.3% in January, and wholesale inventories fell 0.1% last month.
The main event this week will be the January Personal Consumption Expenditures (PCE) Price Index. Economists expect the US PCE to rise 0.3% monthly and the core PCE, which excludes volatile food and energy components, to jump 0.4%. Therefore, any reading above expectations could hurt gold prices today as it could force the Federal Reserve to keep US interest rates high for longer. Obviously, this is a bearish factor for the yellow metal as it affects the opportunity cost of holding non-yielding bullion.
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Another factor affecting the gold market. US Treasury yields were falling across the board yesterday, with the 10-year bond yield falling by 2.4 basis points to 4.291%. Also, the yield on two-year bonds fell by 4.1 basis points to 4.671%, while the yield on 30-year bonds fell by 1.7 basis points to 4.423%.
Moreover, the US currency strengthened in the middle of the week. The US Dollar Index (DXY), a measure of the dollar against a basket of other major currencies, rose to 103.98, from opening at 103.83. In general, the US dollar index is heading towards achieving a monthly increase of 0.7% and has risen by 2.6% since the beginning of the year 2024 to date. As is known, the strength of the US dollar is considered bearish for dollar-denominated commodities such as gold, which makes purchasing them more expensive for foreign investors.
So far, the general trend for gold price is still upward, and according to the performance on the daily chart above, the strongest bull movement requires moving towards the resistance levels of 2055 and 2070 dollars per ounce, respectively. From the last level, the technical indicators will give strong buy saturation signals. Until now, I still prefer to buy gold from every falling level, as global geopolitical tensions still support the purchase of gold. Currently, the closest support levels for gold are 2022, 2010, and 1995 dollars, respectively.
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