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On the eve of the financial crisis! The gold market experienced "rare fluctuations" in 2023, and analysts revealed the truth behind it

2024-03-25

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On Monday (March 25), at the beginning of the Asian market, gold quotes were stable at around US$2,167 per ounce. Gold prices experienced extremely rare fluctuations last week, with single-week fluctuations as high as $77, arousing widespread market concern. Behind this trend, FXStreet analyst Eren Sengezer explained the dynamics of gold prices last week and made in-depth predictions for this week's market.

Sengezer’s article pointed out that gold prices quickly pulled back after breaking through new all-time highs, especially after hitting above $2,220 per ounce. The U.S. PCE inflation data to be released this Friday is expected to have a certain impact on gold prices.

Despite the recent correction in gold prices, Sengezer believes that from a technical perspective, gold prices still have the potential to rise. He pointed out that the boost to the dollar from optimistic economic data in the United States offset the negative impact of the Federal Reserve's policy on it, leading to a rapid reversal in gold prices after reaching a record high last Wednesday.

Gold prices closed at $2,165.40 per ounce last week. Although it once hit a record high of $2,222.65 per ounce, gold prices gave up most of their gains after the market reinterpreted the Fed's policy outlook and U.S. economic data. The U.S. Labor Department reported that initial jobless claims fell to 210,000, while private sector business activity continued to expand healthily. This series of data boosted the dollar. In addition, policy adjustments from the Swiss National Bank and the Bank of England also provided additional support to the dollar.

Sengezer emphasized that a series of important U.S. economic data will be released this week, including final GDP and personal consumption expenditures price index. He pointed out that the market expects GDP data to have a direct impact on the U.S. dollar and gold prices, while the delayed reaction to PCE price index data may appear early next week.

The market expects that the annualized GDP growth rate in the fourth quarter will be confirmed at 3.2%. Market reaction to GDP data is likely to be immediate and still short-lived. Sengezer said an upward revision in GDP data could support the dollar and weigh on gold, while a downward revision in GDP data could pressure the dollar.

Sengezer said that while the PCE price index is typically closely watched by market participants, trading action on Friday is likely to remain subdued as stock and bond markets will remain closed for the Good Friday holiday. Therefore, gold prices may experience a delayed reaction when the market opens next Monday. Stronger-than-expected core PCE price index month-on-month data may support the dollar early next week. On the other hand, a consensus below 0.3% could help gold gain upward momentum.

From a technical point of view, gold prices are still within the upward channel since October last year. Although the relative strength index has fallen back below 70, it still remains above 60, indicating that overbought conditions are correcting and the bullish trend has not changed.

Sengezer said that short-term support for gold prices appears to be at $2,150 per ounce (static level); then $2,130-2,120 per ounce, which is where the 20-day simple moving average (SMA) and the midpoint of the ascending channel are. The first resistance level above is $2,185/ounce (static level), and the next resistance levels are $2,200/ounce (the upper limit of the ascending channel) and $2,223/ounce (historical high).

Despite the challenging outlook for gold prices, Sengezer remains optimistic about the future of gold. While the market is welcoming a new round of data releases, it is paying close attention to the trend of gold prices.

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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On the eve of the financial crisis! The gold market experienced "rare fluctuations" in 2023, and analysts revealed the truth behind it

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