GOLD OUTLOOK & ANALYSIS
- Real yields steadily decline but will FOMC limit gold upside?
- US building permits scheduled later today.
- Key inflection point being tested.
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XAU/USD FUNDAMENTAL BACKDROP
Gold prices are trading marginally lower as the US dollar finds support this Tuesday morning. Bullion has managed to push higher as real yields fall (see graph below) despite elevated 2-year and 10-year Treasury yields. With inflationary pressures being minimized in the US, real yields having softened slightly (inflation expectations possibly outpacing aggressive monetary policy, backing gold.
US REAL YIELDS (10-YEAR)
Source: Refinitiv
Later today, US building permit data (see economic calendar below) will come into focus which shouldn’t provide too many surprises going into tomorrow’s FOMC announcement.
GOLD ECONOMIC CALENDAR
Source: DailyFX
Money market pricing for the rate announcement as shown in the table below, suggests a pause by the central bank but the messaging provided by Federal Reserve Chair Jerome Powell will be key for gold. Any indication of additional rate hikes and sustaining elevated interest rate levels for a longer period could weigh negatively on gold. Any talk around rate cuts will be valuable information with current forecasts between June/July 2024.
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IMPLIED FED FUNDS FUTURES
Source: Refinitiv
TECHNICAL ANALYSIS
GOLD PRICE DAILY CHART
Chart prepared by Warren Venketas, IG
Daily XAU/USD price action above is no testing the 50-day moving average (yellow) after closing above trendline support (black). While this is a tentative push higher, it by no means confirms an upside breakout considering the high impact economic data to come. Traders remain cautious and will react according to Fed forward guidance.
Resistance levels:
- 1950.00
- 50-day MA (yellow)
Support levels:
- 1925.06
- 200-day MA
- 1900.00
- 1884.89
IG CLIENT SENTIMENT: BULLISH
IGCS shows retail traders are currently distinctly LONG on gold, with 70% of traders currently holding long positions (as of this writing). Download the latest sentiment guide (below) to see how daily and weekly positional changes affect GOLD sentiment and outlook.
Introduction to Technical Analysis
Market Sentiment
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