FED and CPI Data Will Be Announced! What Happens to Gold and Bitcoin?

The US CPI data to be released today is very important for the gold and Bitcoin market as it will determine the Federal Reserve’s interest rate stance. Metals Focus Managing Director Philip Newman says gold is unlikely to stay at $2,000 in the long run unless the Fed makes a clear return in his message. While the Bitcoin price is hovering around the $30,000 level, it could break up and down if the data does not meet expectations.

Yellow metal benefits from pricing of rate cuts

The gold market rallied after the banking turmoil and prices continue to trade above $2,000. But Philip Newman says this trend won’t last until the second half of the year. In this context, Newman makes the following statement:

Gold above $2,000 depends on how the market sees the Fed’s interest rate policy. We’ve also seen a jump in safe-haven purchases by Silicon Valley Bank and then Credit Suisse, uncertainty in Europe, individual and institutional investors.

With the market pricing in rate cuts later this year, gold is taking advantage of the negative connotations of the dollar and the reduced opportunity cost of holding the precious metal. “Currently, we are seeing more investors taking a long position below and closing some short positions,” Newman said. Together, they drove the gold over $2,000,” he says.

Gold won’t be traded above $2,000 for a long time!

The gold market is very sensitive to data from the US. Therefore, the next few data may contradict market expectations that the Fed is ready to start cutting rates. In this scenario, gold could drop quickly. In this regard, Newman makes the following statement:

We are skeptical that gold will remain at this level for a while. The Fed did not say it was ready to begin a rate cut. There is currently a mismatch between market expectations and what the Fed is actually saying. As we enter the second half of the year, the market will move more towards the Fed’s position.

Therefore, Newman believes that gold will not trade above $2,000 for much longer. “We’re seeing the Fed raise rates again and then keep rates high long enough,” Newman said. This causes heavy liquidations in the gold market and the price to fall.”

Gold price can see the levels of $ 1,700!

In the current situation, Newman’s scenario will take some time to come to fruition. “The Fed is extremely careful about keeping inflation under control,” Newman said. They don’t want to see their inflation expectations solidify. It is easy to say that gold will hold at these levels. But we need to take a step back. We see more reasons for gold to weaken than hold at these levels,” he continues. Starting from this, Newman points to the following levels:

When the sales begin, the price base of gold may fall as low as $1,700. However, if gold can hold above $1,900 for longer, it could limit selling. This could mean that the gold price will drop less. However, we still think that the price will weaken significantly. Can you see it drop to $1,700? This is possible.

The main factors on gold in the second half of the year will be the weakening of gold demand by central banks and the market realizing that the Fed remains hawkish. “When these factors come together, it will bring gold prices down to perhaps $1,700,” Newman says. There is enough momentum to push gold to new record highs in the short term. But for that to happen, the Fed needs to signal a change. Newman has this to say about it:

You should see comments from the Fed that they are re-evaluating the situation. Maybe you’ll need something more powerful than just data annotations. At the same time, when we reach these new levels, you will see sales coming into it.

Weak dollar holds precious metal price

cryptocoin.comAs you follow on , the price of gold recovered after briefly dropping to $1,990 on Monday. Economists at ANZ Bank are waiting for crucial US Consumer Price Index and Retail Sales data to see if the yellow metal can make more gains. In this context, economists make the following comment:

Weakening USD and returning investment flows are holding prices down. US CPI inflation and Retail Sales will be key for further upside. US CPI data will provide a clearer indication of whether the Federal Reserve will raise rates further. An increase of 25 basis points is currently expected.

Year-end forecast for shiny metal: $2,100

Gold broke the psychological $2,000 barrier last week for the first time since the war in Ukraine erupted last year. UBS economists predict the yellow metal will reach $2,100 by the end of the year. Economists support these estimates as follows:

Gold tends to rise during the weakening of the US Dollar, and downside risks to the dollar have increased with the money market pricing of Fed rate cuts. While volatility can be expected in the near-term, we expect the precious metal to reach $2,100 by the end of the year and $2,200 by March 2024.

Gold technical analysis: Limited upside prospect

Market analyst Anil Panchal outlines the technical outlook for gold as follows. Gold price bounces off the 10-DMA support, reversing the previous week’s retracement from the 11-week ascending resistance line. The precious metal’s recovery also takes cues from the optimistic RSI (14), which is not overbought, while paying little attention to the stagnant MACD signals.

However, gold is well-tuned to nudge the multi-day resistance lines near $2,038 as of press time. However, the RSI could overbought at this level and then challenge gold buyers. Otherwise, a gradual rise towards the previous year’s high of around $2,070 cannot be ruled out.

Alternatively, a downside break of the 10-DMA support level of $1,996 is not an open invitation for gold sellers. Because from March 22, an upward sloping support line joins a two-month horizontal line to highlight the $1,960-57 region as a hard-to-break nut for golden bears. Overall, the price of gold is likely to remain higher even if the upside room seems limited.

What’s next for Bitcoin?

Bitcoin price broke the $30,000 psychological barrier for the first time in nearly 10 months. BTC’s recent gains are due to the bullish sentiment among crypto market participants and the changing macroeconomic outlook.

Technical analyst Akash Girimath believes that Bitcoin price could reach a high of $35,000 in an uptrend. Evaluating Bitcoin’s recent gains, the analyst states that the continuation of the upward momentum may bring BTC to its target of $ 32,687. Beyond the $32,687 level, two critical hurdles are located at $35,063 and $38,500 as seen in the chart below.

The analyst believes that a break below the key support of $24,736 could invalidate the bullish thesis and send Bitcoin price to the Bearish Breaker between $22,291 and $1,592.

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