Gold prices traded sideways on Tuesday, oscillating around the $1,855 per ounce level, even after US inflation surprised to the upside. If gold prices increase, resistance may be encountered near $1,890 per ounce, while if gold prices decline, support may be found near $1,825 per ounce.
Gold prices have been predominantly directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar was volatile on Tuesday as US inflation data beat estimates. The dollar index dropped as low as 102.7, then swung upwards, reaching 103.4. US Treasury yields gained on renewed Fed rate hike expectations, with the US 10-year bond yielding over 3.75%.
US CPI data on Tuesday showed that price pressures remain high and are not easing at the anticipated pace. US headline inflation in January dropped to 6.4% year-on-year versus the 6.2% expected. This represents a marginal cooling from December’s 6.5% print.
Cooling price pressures in the past few months gave the US Federal Reserve some leeway towards scaling back its interest rate increases, putting pressure on the dollar. The Federal Reserve raised interest rates by only 25 basis points at its February meeting, bringing the benchmark interest rate to a target range of 4.50% to 4.75%.
January’s CPI print illustrates the danger of inflation becoming entrenched, which may force the Fed to rethink its recent dovish pivot. Current market odds lean towards further tightening in the upcoming Fed meetings and an increase in interest rates up to 5.25%. Increases in central banks’ interest rates put pressure on gold prices since assets yielding interest become a more appealing investment compared to gold as interest rates rise.
Fedspeak over the past week has been hawkish, emphasizing that further rate rises should be expected and that interest rates will need to remain high for a long period. On Tuesday, Fed’s Williams emphasized that rates still have higher to go and they will have to be kept high for some time. Fed's Bowman stated on Monday that the UC central bank aims to continue raising interest rates to bring inflation down below 2%.
Fed Chair Jerome Powell has stated that the disinflation process has begun but warned that it still has a long way to go. The Fed’s stance appears cautiously optimistic, reinforcing the notion that the Fed’s decisions will be based strongly on disinflation rates and the state of the US economy.
The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.
Fill in the registration
form and click
Once you are in the client secure area, please proceed with uploading your Proof of Identity and Proof of Residence.
When your live account is approved, you can deposit funds and start trading on your chosen platform!
The website you are now viewing is operated by TopFX Global Ltd, an entity which is regulated by the Financial Services Authority (FSA) of Seychelles with a Securities Dealer License No SD037 that is not established in the European Union or regulated by an EU National Competent Authority.
If you wish to proceed please confirm that you understand and accept the risks associated with trading with a non-EU entity (as these risks are described in the Own Initiative Acknowledgment Form and that your decision will be at your own exclusive initiative and that no solicitation has been made by TopFX Global Ltd or any other entity within the Group.
Don't show this message again
These cookies fall under the following categories: essential, functional and marketing cookies. Marketing cookies may also include third-party cookies.
You can customize your selection of which cookies you want to accept.
These cookies are necessary for the website to function correctly and cannot be switched off.
Functional cookies allow the website to remember users' preferences and the choices you make on the website such as username, region, and language.