Gold prices have been fluctuating in a narrow range above $2,000 amid a calm market mood. The precious metal is currently experiencing back-and-forth movements around $2,005 in the early Asian trading session, following a gradual correction from $2,011.90. The US Dollar Index (DXY) is also oscillating below 101.80, despite rising expectations of another interest rate hike from the Federal Reserve (Fed).
In Tuesday’s trading session, the S&P 500 futures finished on a flat-to-positive note after some volatile moves. Below-forecast corporate results from Goldman Sachs and Johnson and Johnson dragged United States equities, indicating a stock-specific market mood. A correction in the USD Index also weighed on US Treasury yields, with the yield on 10-year US Treasury bonds dropping below 3.58%.
Meanwhile, hawkish commentary from Fed policymakers suggests that the upside bias for the USD Index remains robust. St. Louis Fed President James Bullard has advocated for the continuation of a policy-tightening spell by the central bank, considering the fact that labor market data is still strong, as reported by Reuters. He added that the demand for labor has not softened yet, and a strong labor market leads to strong consumption, which reduces the likelihood of a recession in the second half of 2023.
Atlanta Fed Bank President Raphael Bostic also expressed his support for raising interest rates one more time and then holding them above 5% for some time to curb inflation that remains too high, as reported by Bloomberg.
Regarding gold’s technical analysis, the metal’s price has successfully defended a breakdown of the Rising Channel pattern for now, which is observed on a two-hour scale. Gold is making efforts to shift comfortably above the 20-period Exponential Moving Average (EMA), which is currently hovering at $2,004.30. The Relative Strength Index (RSI) (14) has also shifted into the 40.00-60.00 range from the bearish range of 20.00-40.00, indicating that the momentum is no longer bearish.
Despite the calm market mood, continuous hawkish commentaries from Fed officials could put pressure on gold prices in the near term. As the central bank policymakers express their concerns about stubbornly high inflation and insist on the need for further rate hikes, gold prices could experience a downward trend. Gold’s demand could be negatively affected if the Fed tightening cycle continues in the medium term, potentially eroding gold’s appeal as a safe haven asset.
On the other hand, some factors might provide support for gold prices. The ongoing Russia-Ukraine war and rising geopolitical tensions could fuel demand for safe-haven assets like gold, potentially leading to upward price movements. Additionally, the possible consequences of expected rate hikes on the US and global economies might prompt investors to look for alternative assets to protect their investments, again driving demand for gold.
In conclusion, gold prices are currently seeing some fluctuations within a tight range above $2,000, reflecting the overall calm market mood. The precious metal’s future performance will depend on multiple factors, including the Federal Reserve’s monetary policy decisions, global geopolitical events, and economic developments. Gold investors should closely monitor these factors and adjust their strategies accordingly to navigate the changing market conditions effectively.