As the week begins, the price of gold remains steady just below the $2,500 mark, following a rebound on Friday. Traders are closely watching the upcoming US Consumer Price Index (CPI) data to gauge the potential size of the Federal Reserve’s interest rate cut next week.
Gold Price Supported by Dovish Fed Expectations
Gold price is currently hovering around the key support level of $2,498, benefiting from a risk-averse market sentiment despite a slight uptick in US equity futures. Concerns over demand in China, the world’s largest consumer of gold, have emerged following softer-than-expected inflation data, prompting speculation of additional stimulus measures by Chinese authorities.
The outlook for gold remains positive due to expectations of a significant Fed rate cut. However, the recent recovery in US Treasury bond yields, driven by improvements in US stock futures, has limited gold’s upward potential.
On Friday, the US Dollar staged a late recovery after disappointing labor market data, leading to a sell-off in risk assets and boosting demand for safe-haven assets like gold.
Technical Analysis and Outlook for Gold Price
On a technical level, gold price is expected to maintain a bullish bias as long as it stays above the 21-day Simple Moving Average (SMA) at $2,498. The Relative Strength Index (RSI) is also indicating bullish potential, with a rebound above the 50 level.
To strengthen its bullish momentum, gold price needs to surpass the $2,500 level and target the next resistance at $2,532. Conversely, a correction could occur if gold price falls below the 21-day SMA, with the next support level at $2,472.
Overall, gold price is likely to remain range-bound until the release of US inflation data on Wednesday, which will provide further insight into the Fed’s rate cut decision.
Key Points About Gold
- Gold is considered a safe-haven asset and a hedge against inflation and currency depreciation.
- Central banks are major holders of gold, using it to diversify their reserves and support their currencies.
- Gold has an inverse correlation with the US Dollar and US Treasuries, making it an attractive asset during times of economic uncertainty.
- Factors such as geopolitical instability and interest rate changes can impact the price of gold.