Investors are going back and forth over the timing of the Federal Reserve’s rate cuts this year. In this environment, the gold price continues to consolidate in a narrow range. Analysts do not expect this situation to change in the short term.
The most likely scenario for the gold price: Consolidation
Currently, markets see the probability of a rate cut in March as approximately 50/50. Expectations are down significantly from last week, when markets predicted an 80% cut next month. Meanwhile, the hawkish shift in US monetary policy has caused gold prices to fall to their lowest level in five weeks, just above $2,000.
Although gold recovered from recent lows, it closed last week with a loss. Currently, economic data provides little guidance on U.S. monetary policy. Therefore, analysts do not expect the gold price to break out of this consolidation anytime soon. Zaye Capital Markets chief investment strategist Naeem Aslam makes the following assessment:
Investors seem comfortable holding riskier assets. This means the path of least resistance for gold is consolidation more than anything else.
“This short game will continue to be painful!”
cryptokoin.comAs you follow from , the gold price tested the critical support around $2,000. Now it is consolidating at these levels. James Stanley, senior market strategist at Forex.com, expects higher volatility in the gold market. However, he notes that any major declines in gold are solid buying opportunities. In this context, the analyst makes the following statement:
I think this short game will continue to be painful. The market approached $2,000 last week and then rose even higher, even as interest rates were still holding up. If or when prices drop, sales can be huge. However, these bear traps have made sellers very cautious.
TDS: Under these conditions, it is difficult for the gold price to exceed $2,200!
Meanwhile, the gold price performed poorly last week. According to TD Securities, it is possible that only weaker US data will persuade the Fed to switch to the dovish side. TDS economists share the following predictions.
With prices rising back above the psychologically important $2,000 level, more short closings and new long positions could follow this week. But only weaker US data is likely to persuade the Fed to lean towards the dovish side. This means that a convincing upward trend towards our $2,200 average price next quarter is unlikely to develop by then.
Data and event agenda of the week
Meanwhile, the dollar continues to influence price movements of the precious metal. For this reason, some analysts state that gold investors should follow the US dollar closely. The coming week may see some volatility for the US dollar with monetary policy decisions by the three major central banks.
First, experts expect the Bank of Japan to maintain its dovish stance and negative interest rates. Next up is the Bank of Canada. With the surprise rise in inflation in December, the central bank has a harder path to follow. On Thursday, the European Central Bank closes out the week. This poses the biggest risk for the US dollar and gold. Last week, ECB members pushed back on early rate cuts at the World Economic Forum in Davos, Switzerland. Some analysts have noted that a hawkish ECB could put pressure on the US dollar and be supportive for the gold price in the near term.
- Monday: Bank of Japan monetary policy decision.
- Wednesday: Flash PMI data. Bank of Canada monetary policy decision.
- Thursday: European Central Bank monetary policy decision. US 4th quarter GDP data. Durable goods sales. New home sales.
- Friday: Core PCE. Personal income and expenses.
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