Gold XAU/USD bullish amidst tensions, eyes $2,055-$2,085. Supported by geopolitical unrest and Fed’s stance. Key supports at $2,000, $1,985.
- As we mentioned before, the increase in global geopolitical tensions is likely to remain supportive of further gains in gold prices, which reached the resistance level of $2,049 per ounce during yesterday’s session before stabilizing around $2,036 per ounce at the time of writing.
- Recently, gold prices rose by $20 yesterday and started this exciting week’s trading from the support level of $2,023 per ounce.
- In addition to the level of the US dollar, the gold market was also affected by bond yields, as US Treasury yields were mixed and erased previous losses after a report indicated that the US labor market may be hotter than economists expected.
- Previously, US employers announced 9 million job openings at the end of December, slightly above economists’ expectations and slightly above the level of November.
Meanwhile, traders were hoping that the data would show a decline in the number of job opportunities, that would fit more accurately with the trend that sent Wall Street indexes to a record high. Furthermore, the slowdown in economic growth was strong enough to control inflation but not enough to lead to recession. Clearly, it is hopes like these that have fueled excitement about the possibility of the Federal Reserve cutting US interest rates several times this year. Particularly, the cuts would represent a sharp reversal from the large increases in interest rates over the past two years, and the cuts would give a boost to the economy and investment prices.
The Federal Reserve begins its latest interest rate meeting, but no one expects it to cut US interest rates soon. However, this will not prevent economists and traders from analyzing every piece of communication issued by the Federal Reserve on Wednesday after the end of its meeting. Moreover, they will be looking for evidence that a rate cut may arrive at their next meeting in March.
According to trading on global market platforms, the yield on 10-year Treasury bonds fell to 4.07% from 4.09% late Monday. Recently, it was at 4.04% just before the jobs data was released and a separate report showed that US consumer confidence was rising more than expected. Two-year Treasury yields, which move more based on expectations of Fed action, rose further. It rose to 4.38% from 4.32% late Monday.
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On another economic level, The European economy failed to grow at the end of 2023, dragging on a recession for more than a year amid rising energy prices, the rising cost of credit and deflation in former powerhouse Germany. Moreover, zero economic growth during the October-December period last year followed a 0.1% contraction in the three months before that, according to figures released on Tuesday by the European statistics agency Eurostat.
This extends to a miserable series of economic nonsense, as the 20 countries that use the euro have not shown significant growth since the third quarter of 2022, when the economy grew by 0.5%. The beginning of this year, 2024, does not look better, as business activity indicators are still in the red and indicate contraction. In addition, shipping disruptions in the Red Sea have restricted global trade through the Suez Canal, a major route between Asia and Europe, raising shipping costs and threatening increased inflation. Ultimately, the new figures highlight the growing gap between Europe and the United States, whose economy grew by 0.8% in the fourth quarter compared to the previous three-month period, or at an annual pace of 3.3% – better than expected.
There is no change in our technical view that the general trend of the gold price will remain bullish, and the continuation of global geopolitical tensions will continue to support gold’s gains, regardless of the gains of the US dollar. Therefore, any support levels may remain an opportunity for the return of buying gold, and there will be no break of the current upward trend without moving towards the 2000 and 1985 support levels respectively. On the other hand, the continuation of positive momentum may motivate bulls to return to the vicinity of the resistance levels of $2055 and $2085, respectively. Also, the price of gold this week will be affected by the level of the US dollar, the reaction to the US Central Bank’s announcement and the US job numbers, in addition to the increasing global geopolitical tensions, especially in the Middle East region.
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