Attention to These Dates and Data Next Week for Gold Prices!

After a bad start to the week, gold rallied above a key resistance zone on Wednesday, posting impressive gains and hitting a nearly two-month high of $1,850 on Thursday. Market analyst Eren Sengezer states that the yellow metal went into consolidation mode from this level, giving back some of its weekly gains, but closing in positive territory for the second week in a row. Eren Sengezer’s evaluations along with the developments in the market and technical analysis of gold prices. cryptocoin.com We have prepared for our readers.

What developments took place in the market last week?

Market rumors that the US Federal Reserve will raise interest rates by 50 basis points in March increased in volume in the first half of the week and supported the US Treasury bond yields. The benchmark 10-year US T-bond yield rose more than 5% and hit a two-year high of 1.9% early Wednesday. Gold prices, on the other hand, rose nearly 2% from Tuesday’s close and hit $1,849 late Thursday, the strongest since Nov.

Fed Chairman Christopher Waller said on Saturday (January 15th) that he would not favor a 50 basis point hike in March, just before the start of the Fed’s blackout period. Still, that comment has caused investors to speculate that this is on the table as an option.

Additionally, billionaire investor Bill Ackman argued that the Fed should raise 50 basis points to regain its credibility. Finally, Anna Wong, US Chief Economist at Bloomberg Economics, said the in-house Fed reaction function model showed that a 50 basis point rate hike in March was warranted. The analyst makes the following assessment:

In the second half of the week, safe-haven flows began to dominate the financial markets, and the sharp decline in US bond yields fueled the gold rally.

Important agendas for gold prices next week

On Wednesday, the Fed will announce its policy rate decision and will release the Monetary Policy Statement after its two-day meeting. The analyst predicts the pigeon and hawk scenarios and their outcomes as follows.

Pigeon scenario: Fed adopts dove tone, suggesting it will remain patient with policy tightening. U.S. T-bond rates could drop sharply and provide support on such a change in policy outlook. FOMC Chairman Jerome Powell will need to voice renewed concerns about the labor market and growth outlook to convince investors they won’t be in a rush to raise interest rates after March. According to CME Group’s FedWatch Tool, the probability of the Fed not changing the policy rate in March is only 10%.

Falcon scenario: President Jerome Powell will certainly have to answer questions about the possibility of a 50 basis point increase in March. If Jerome Powell discloses that they are discussing such an option, US T-bond rates could rise even higher, forcing gold to turn south. In addition, the decision to increase the amount of tapering can be evaluated as an upward development for the dollar. Along with these, the analyst explains the scenario he sees most likely as follows:

The most likely scenario is that the Fed does not change its policy settings and policymakers reiterate that they will continue to monitor economic developments closely. In this case, Friday’s Personal Consumption Spending (PCE) Price Index data, the Fed’s preferred inflation indicator, could trigger a significant market reaction.

Since November, the Fed has made clear that it will prioritize inflation control over employment, and that a stronger-than-expected PCE inflation reading could cause investors to begin repricing an aggressive hawkish policy path. Also, next week’s US economic report will include the US Bureau of Economic Analysis’s first forecast for fourth-quarter Gross Domestic Product (GDP) growth. Annualized GDP is expected to rise to 5.8% from 2.3% in the third quarter. The analyst makes the following assessment:

While such a recovery in economic activity will help the dollar maintain its strength, the opposite could put pressure on the currency, even if the Fed refrains from giving a dovish message.

Gold prices technical outlook and gold sentiment survey

According to market analyst Eren Sengezer, gold prices dropped to the 200-day SMA earlier in the week, but had no trouble holding it above that level, suggesting that sellers are staying on the sidelines. The analyst states that the bullish trend is confirmed by the Relative Strength Index (RSI) indicator, which sits comfortably above 50 on the daily chart, noting the following levels:

Static resistance seems to be formed at $1,850. If gold rises above this level and starts using it as support, it could target the $1,870 area. Ideally, this move could be accompanied by another drop in the 10-year US T-bond yields in the dovish Fed tone.

On the Flip side, the analyst states that $1,830 is aligned as initial support and a daily close below this level could open the door for an extended correction towards $1,815, pointing to the following levels:

The near-term outlook is likely to continue bullish as long as gold prices do not drop below the $1,805/1,800 area, where the ascending trendline meets the 200-day SMA.

Following this week’s move, the FXStreet Forecast Survey shows a bullish trend. Average estimates for one-week and one-month views are $1,850 and $1,870, respectively.

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