Gold Faces Complex Scenario as Rate-Cut Expectations and Fed Pushback Loom
Gold prices started Monday’s session slightly higher before easing off their best levels at the time of writing. The yellow metal is facing a complex scenario amid rising rate-cut expectations and a potential pushback by the Federal Reserve. The rates market has priced in aggressive rate cuts for the near future, and if the Fed pushes back against those expectations, it could undermine gold. However, the long-term outlook for gold remains bright, making it an asset worth watching.
Long-Term Outlook Bright for Gold Despite Uncertainty in the Market
Despite the current uncertainty, the long-term outlook for gold remains positive. Last week, gold finished modestly higher despite higher-than-expected inflation data in the US. The market’s pricing of a rate cut in March by the Federal Reserve has risen to around 80% probability, according to the CME’s FedWatch tool. This expectation has led to a drop in bond yields and a rise in gold and silver prices. The Fed’s pushback against a sooner rate cut could pose a risk to gold and other dollar-denominated assets. However, other factors, such as inflation concerns and geopolitical tensions, continue to support the demand for gold.
Investors Advised to Watch for Dip-Buying Opportunities in Gold
From a technical perspective, the outlook for gold remains positive. Since bottoming in October, gold has formed higher lows and higher highs, with the exception of a failed breakout to a new record in December. Gold has also held above the 200-day moving average and the shorter-term 21-day exponential moving average. Traders may want to consider dip-buying strategies near key support levels, unless they are experienced in counter-trend strategies. A breakout above the short-term bearish trend line could signal further technical buying and a potential retest of the December peak.
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XAU/USD, XAG/USD, Gold, and Silver Start Session Strong, but Slightly Retract
At the start of Monday’s session, XAU/USD, XAG/USD, gold, and silver prices were slightly higher. However, they have since retraced from their best levels. The rates market continues to price in aggressive rate cuts, leading to uncertainty in the gold market. The long-term outlook for gold remains positive, with factors such as inflation and geopolitical tensions supporting the demand for the yellow metal. Traders should watch out for dip-buying opportunities near key support levels and monitor the Fed’s potential pushback against rate-cut expectations.
Analyst comment
The news can be evaluated as neutral. The short-term scenario for the gold market is uncertain due to rising rate-cut expectations and a potential pushback by the Federal Reserve. However, the long-term outlook for gold remains positive, supported by factors such as inflation concerns and geopolitical tensions. Traders are advised to watch for dip-buying opportunities near key support levels and monitor the Fed’s actions regarding rate cuts.
