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Gold market outlook: The market is seeking guidance from the Federal Reserve on interest rate cuts this week. Gold prices will be difficult to rise significantly in the short term.

2024-01-08

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Many analysts said that although gold prices have fallen during the high consolidation period, the gold market will still have a good start after the first trading week of 2024.

Spot prices closed below $2,050 an ounce last week, down nearly 1% from the previous week.

Some analysts said the market remains locked in a tug-of-war as investors try to predict the Fed's next move. The market currently predicts that the probability of the first interest rate cut at the March monetary policy meeting is 68%.

However, some economists say the Fed is unlikely to be ready to cut rates at the start of the new year following the release of December employment data. The latest employment figures show that 216,000 jobs were created last month and wages increased by 0.4%.

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Fixed income analysts at TD Securities said: "The jobs report confirms the view that the Fed may continue to resist early rate cuts priced in by the market until the signal becomes clearer. Having said that, we do expect inflation to rise in the next few reports "Weakness will continue, which will open the door to a rate cut in the second quarter."

Meanwhile, Philip Streible, chief market strategist at Blue Line Futures, said interest rate cut expectations remain high as some analysts believe the latest jobs report shows cracks are beginning to appear in the labor market. He noted that the large number of government jobs in the December report appeared to skew the data.

Streible added that with the possibility of a rate cut in March, gold prices should be well supported above $2,000 an ounce; however, he added that he did not know if there would be enough momentum to push prices steadily higher. $2050+.

"It's like a coin flip right now and that will keep gold in this consolidation range," he said.

James Stanley, senior market strategist at Forex.com, said this week's price action suggests that gold will be capped at $2,050 in the short term; however, he added that gold bears will face a difficult path to the downside as the Federal Reserve is still expected to cut interest rates this year. .

"The thinking is that this resistance will last long enough to cause a decline, but that could take a month or two," Stanley said. "This thing will take off when the Fed officially pivots. But real rates need to go higher first before they can declare a 'W' for inflation, and with an election year coming up, I think they're hoping to get that closer to November Shift. Ideally, gold should break below 2,000 and clear out some longs. Then, more OTC money could push prices higher.”

Although markets will return to a five-day work week this week, investors are expected to continue digesting December's employment data. The main highlight is the December Consumer Price Index report due later this week. Some economists believe the inflation data could solidify the Fed's March moves.

Some economists point out that although consumer prices have fallen from their 2022 highs, the Fed still needs to work hard to get inflation down to its 2% target.

Headline inflation is expected to remain around 3%; however, core inflation is expected to remain around 4%, twice the central bank's target.

Important economic data this week:

Thursday: U.S. Consumer Price Index (CPI), weekly jobless claims

Friday: US Producer Price Index (PPI)

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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Gold market outlook: The market is seeking guidance from the Federal Reserve on interest rate cuts this week. Gold prices will be difficult to rise significantly in the short term.

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