All technical indicators have moved towards levels of strong and sharply overbought conditions, caution is advised against buying at these levels.
- The easing of signals for future US interest rate hikes and the subsequent decline in the US dollar were a strong catalyst for gold prices to move towards new record levels.
- It reached the resistance level of $2222 per ounce, the highest ever, before stabilizing around $2203 per ounce at the start of Thursday’s trading session.
Yesterday, US stock market indices rose to record highs after the Federal Reserve indicated that it is likely to implement the US interest rate cuts that Wall Street markets are looking for this year, despite some disappointing high inflation reports. According to trading platforms, the S&P 500 index jumped 46.11 points, or 0.9%, to 5224.62 points, hitting its all-time high for the second day in a row. Already, it had risen 9.5% so far in 2024, slightly better than the full-year average over the past two decades.
The Dow Jones Industrial Average also jumped 401.37 points, or 1%, to 39512.13 points, and the Nasdaq Composite Index rose 202.62 points, or 1.3%, to 16369.41 points. Also, both hit record highs. Overall, some of the tensions that prevailed in Wall Street markets during the day dissipated after the US Federal Reserve released a survey of its policymakers, which showed that the median still expects the US central bank to make three rate cuts in 2024. Clearly, this is the same number they expected in 2024. Expectations of the relief that such cuts will provide were a major reason for the rise in US stocks to record levels.
The fear in Wall Street markets was that the US Federal Reserve might cut the number of expected cuts due to a series of recent reports that showed inflation is still hotter than expected. In general, the Federal Reserve keeps the main interest rate at its highest level since 2001 to reduce inflation. High interest rates slow the overall economy by making borrowing more expensive and hurting investment prices.
For his part, US Federal Reserve Chairman Jerome Powell said he had noticed the worse-than-expected reports in the past two months, but they “haven’t really changed the overall story, which is that inflation is moving down gradually on a sometimes-bumpy road to 2%. That story hasn’t changed.”
Powell added that the next move for the Federal Reserve is likely to be a cut sometime this year, but he needs more confirmation that inflation is moving towards its 2% target. Moreover, the Federal Reserve does not have much room for error. Therefore, cutting rates too early could allow inflation to accelerate, but cutting too late could lead to widespread job losses and a recession. Powell said of the January and February inflation data, “I don’t think we really know if this is a bump in the road or something more than that; “We have to find out.” “In the meantime, the economy is strong, the labor market is strong, and inflation has come down significantly, which gives us the ability to deal with this issue carefully.”
On the other hand, US Federal Reserve officials updated their expectations for US economic growth this year. Also, indicating that they may end up keeping the main interest rate higher in 2025 and 2026 than previously thought.
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Returning to the recent technical analysis of the gold price, we indicated that there might be an opportunity for strong upward breakthroughs. Firstly, it breached the $2200 resistance per ounce if the tone of the US Federal Reserve was less hawkish, which has occurred. Now, with the movement above the $2220 resistance per ounce. Currently, all technical indicators have moved towards levels of strong and sharply overbought conditions, caution is advised against buying at these levels. Activating selling operations while awaiting profit-taking is possible but without risking much. After the recent gains, breaking the $2145 support per ounce gains importance for breaking the current upward trend.
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