Gold Outlook: Is there a struggle incoming amid neutral momentum in dollar?

Gold Outlook: Is there a struggle incoming amid neutral momentum in dollar?

Gold price struggled for the direction yesterday. Four Federal Reserve (Fed) officials emphasized that they don’t see an urgent case to cut rates, and the central bank would like to see more evidence of inflation data before it acts.

Adding to this, The yellow metal benefits from the safe-haven flow amid the ongoing geopolitical tensions in the Red Sea. The gold price currently trades near 62524 almost flat compared to previous day’s close of 62316.00

Meanwhile, the US Dollar Index, an index of the value of the USD measured against a basket of six world currencies, drops to the 104.052 mark. The US Treasury yields edge lower, with the 10-year yield standing at 4.11%.

Fed Governor Adriana Kugler, Boston Fed President Susan Collins, Minneapolis Fed President Neel Kashkari, and Richmond’s Thomas Barkin were all noncommittal to talk about the timeline of interest rate cuts, despite a significant improvement in inflation last year. The languages generally match Fed Chair Jerome Powell’s message from the previous week, which emphasized that the US central bank isn’t ready to begin rate cuts until policymakers are confident that inflation is on track to reach the 2% target.

A lack of bets on a March rate reduction and are anticipating the first-rate cuts in the May meeting. That being said, the high-for-longer narrative in the US diminishes the incentive for investors to build new position in the gold as it pays no interest, thus resulting pressure in gold price.

However, the escalating geopolitical tension in the Middle East might lift traditional safe-haven assets like gold and cap the downside of yellow metal. Since Friday, the US military has carried out dozens of airstrikes on sites in Iraq, Syria, and Yemen. Joe Biden’s government said that the wave of strikes was in retaliation to a drone strike that killed three US troops at a military base in Jordan on January 28, as well as continued attacks on commercial ships in the Red Sea by Yemen’s Houthi militia. 

Looking ahead, the weekly Initial Jobless Claims, Wholesale Inventories, and the speech by Fed’s Barkin (Richmond) will be later on today may give some direction the prices.

Technical Outlook – Gold:

The price of gold was neutral yesterday. The price was near 62524 compared to the previous day’s close of 62316.00.

Intraday price action led to the formation of a Doji candlestick, indicating indecision among gold traders. The trading range is expected to be between the immediate support at 62180 and the immediate resistance at 62550.00.

When prices give both sides a break, prices move accordingly. Conversely, a break above 62550 opens the door to 62880-63200. Conversely, core support at 62180 is below it, prices may pull to 61850-61600.0.

Commodity Samachar
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Also Read: Economic Data: Will China Inflation And RBI Policy Take Lead?, Forex News Letter: Fate of Gold Hanging in the Balance?

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