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Gold gains as more major central banks increase their bets on rate cuts in early 2024. The precious metal is receiving additional support from the cautious sentiment of the market. Gold is trading at 2029.38 at the time of writing.
Early on Thursday in the European session, the price of gold maintains a slightly bullish tone as it moves closer to the peak of the previous few days’ trading range.
In the final week of November, there were 220,000 US jobless claims, up from 218,000 the week before. This supports the idea that the Fed may be inclined to begin reducing rates in March 2024 and validates the weakening trend of the US labour market that was predicted by the JOLTs and the ADP reading earlier this week.
Bullion sellers are being restrained by investors’ growing confidence that the period of tightening by major central banks is ending and their conjecture that rate cuts may occur sooner than expected.
At their monetary policy meeting next week, the Fed is almost certainly going to keep rates unchanged. The market is pricing in a 50% chance that rate reductions will begin in March of the following year. For December 14, investors anticipate no change from the European Central Bank (ECB), but beginning in March of next year, they anticipate a 150-point rate cut.
The Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) both paused earlier this week, providing more proof that the tightening cycles are ending.
The labour market is loosening, as evidenced by US Jobless Claims data, which raises hopes that the Fed may be compelled to cut rates earlier than expected. Investors are currently examining the nonfarm payrolls from Friday. Another downbeat reading here might boost hopes of Fed rate cuts in early 2024 which would push Gold higher.
A 50% chance of a 25 bps rate cut in March 2024 and a 99% chance that the Fed will hold rates next week are priced into the CME Group Fed Watch tool.
Fears regarding the stability of the second-largest economy in the world have returned in response to Moody’s warning about China’s debt credit rating, which has affected market sentiment and strengthened the case for safe-haven gold.
Although it is still on track for a large weekly recovery, the US Dollar has retreated from its highs from Wednesday as US yields continue to decline to three-month lows.
Technically speaking, gold is searching for a direction, moving in a constrained range, finding support above the crucial $2000 mark, but failing to find any real take-up as it gets closer to the $2040 mark.
The price action is capped below the 50-period SMA on the four-hour chart. A lack of direction is indicated by the RSI’s erratic behaviour around the 50 line as investors wait for Friday’s release of the Nonfarm Payrolls report.
Broadly speaking, the longer-term bullish trend that began with the lows in early October is still in place. The path towards $2,067, which is ahead of the record-high $2,150, is guarded by immediate resistance, which is still at $2,040. On the down side, a confirmation below $2,000 would add bearish pressure towards $1,950 and $1,932, negating the bullish view.
