gold price regaining $1,950 to kick off the month of February.
The price of gold(XAUUSD) is currently over $1,950, where it has been for the past 10 months, as bulls take a break following two consecutive days of strong increases. Despite a rise in US Treasury rates so far on Thursday, the US dollar (USD) is still licking its wounds. The Bank of England (BoE) and the European Central Bank (ECB) are the next central banks to announce their choices, and all eyes are now focused on them.
Fed Chair Jerome Powell devalues the US dollar by raising the yield on US Treasury bonds.
The overnight risk surge has lost momentum as traders brace themselves for yet another tumultuous trading session. The US dollar’s decline has stalled amid a slight increase in US Treasury bond rates. This Thursday, the US Federal Reserve is absent, and the focus is on the Bank of England and the European Central Bank. Despite the dramatic decrease in headline inflation in the Eurozone to 8.5% in January, both central banks are expected to announce a rate increase of 50 basis points (bps).
However, the European Central Bank is expected to come out quite hawkish. The US Dollar and US Treasury rates were both destroyed along with anticipation of a dovish “Fed turn” since Powell refrained from opposing loosening financial conditions while also allowing for rate reduction, subject to sharper drops in inflation.
The price of non-interest-bearing Gold often gain from dovish forecasts for the Federal Reserve. Following Powell’s remarks, the end-2023 Fed Funds Rate was estimated to be around 4.4% as markets priced in rate cuts, according to Reuters’ Fed Watch. Futures pricing for the US Fed Terminal Rate also decreased to below 4.9%.
Now the emphasis is on the monetary policy decisions made by the European Central Bank and the Bank of England.
EURUSD pair will see a new surge should ECB President Christine Lagarde reaffirm her hawkish stance and hint at another 50-bps rate hike at the next meeting. Which may have a significant negative impact on the US Dollar generally. The price of gold priced in USD is projected to increase because to the US dollar’s continued decline.
In the meanwhile, a hawkish ECB outlook may cause the Bank of England’s prospective dovish policy change to be disregarded. The BoE is scheduled to issue a Future rate increase will be slower due to the possibility of a recession and the tight labor market.
After Federal Reserve Chairman Jerome Powell repeatedly stated at the post-policy meeting news conference that the “disinflationary” process now appeared to be underway. The US dollar came under intense selling pressure and erased the initial spike, driven by the anticipated 25 bps Fed rate hike announcement. His remarks suggested that the Fed’s cycle of tightening was most certainly nearing a tipping point.
Gold(XAUUSD) Technical Outlook
According to the technical setup of the Gold price on the daily chart, the market appears to have once again swung back in favor of Gold purchasers following the Federal Reserve’s dovish decision.
The 14-day Relative Strength Index (RSI) is testing the overbought region, indicating that the brilliant metal has further upward potential. In order to begin a sustained advance toward the April 2022 high just shy of the $2,000 mark, gold price must find acceptance above the near-term resistance at the $1,960 level.
If the gold price declines from higher levels, it may attempt to surpass the previous week’s high at $1,949; below that level, a further correction toward the $1,920 area cannot be ruled out. Should there be a decline, the bullish 21-Daily Moving Average (DMA) around $1,912 will continue to protect it.
