Bullish Gold Price Pattern After Mixed FED Signals
The Gold price has formed a bullish reversing pattern on the daily chart, after finding support at the 100 SMA. XAU fell below $2,000 after the upbeat US CPI inflation on Tuesday, but the 100 SMA held as support and the Gold price bounced higher in the second part of the week.
Gold Chart Daily – Finding Support at the 100 SMA
Gold dipped below $2,000 twice this week, once after the CPI consumer inflation report early in the week, and once on Friday after the strong PPI producer inflation report. The considerable decline in January retail sales in the United States indicated a slowdown in household spending. This has raised concerns about the pace of economic recovery.
FED Seems Unmoved by This Week’s Data
This has led to speculation about the possibility of further interest rate cuts by the Federal Reserve (FED) in 2024 as consumer spending slows, boosting demand for gold as a hedge against potential economic downturns. However, consumer spending tends to slow after Black Friday in November and the Christmas period in December.
So, Gold did dive below $2,00 on the prospects of the FED keeping rate higher for longer after the strong CPI and PPI inflation reports, but the FED doesn’t look too moved by the numbers this week. We had a number of FED speakers on Friday repeating that nothing has changed, so the market seems confused about whether the FED will start cutting sooner or later.
The consistency in messaging from Federal Reserve officials, including Mary Daly who is seen as a representative of Fed Chair Jerome Powell, suggests that the central bank’s stance remains unchanged despite recent economic data such as the Consumer Price Index (CPI) and January retail sales.
FED’s Mary Daly Comments on Friday
Daly said that notices nothing out of the norm, as inflation continues to progress in the right direction, while the FED economic projections are similar to those from December. The components of lower inflation that were observed in Q3 and Q4 of 2023 are still present, but they’ll continue to observe the situation. The monetary policy seems to be working, but it will depend on how long it takes to finish the task. The neutral rate is now estimated to be between 0.5% and 1%, with a nominal rate of 2.5 to 3 percent. Gold bounced higher in the last two days of the week, but it is facing the 500 SMA (yellow) as resistance now, which was acting as support around $2,020 on the way down.
Gold Live Chart
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