A strong trading week in which bulls controlled the direction of the gold market, as gold futures rose to their best levels in nine months. It is supported by a weaker US dollar and the Fed's more pessimistic expectations. Overall, the price of the yellow metal has been rising since November, thanks to the pending slowdown in the US central bank's tightening cycle, which should support bullion prices. The XAU/USD gold price gains extended to the $1922 resistance level, the highest price since April 2022.
In general, gold recorded a weekly gain of 2.4%, which raises its rise since the beginning of the year 2023 to date to nearly 5%. In the past three months, the price of the precious metal has increased by more than 16%. As for the price of silver, the sister commodity to gold, it also returned above $24. Accordingly, the price of the white metal recorded a weekly support of 1%, to become positive for the year. Since November, silver prices have risen by 33%.
In general, the biggest driver for gold and silver was the weak dollar. The US Dollar Index (DXY), which tracks the greenback's performance against a basket of other major currencies, was relatively flat on Friday, trading at around 102.25. Accordingly, the index will suffer a weekly decline of 1.5%.
A lower dollar is good for dollar-denominated commodities because it makes them cheaper for foreign investors to buy.
Meanwhile, after the US inflation and jobs reports for December, financial markets are anticipating that the Fed will trigger a quarter-point increase in the Federal Funds Rate (FFR). The latest talk is that the Fed will raise its benchmark interest rate to around 5% and then pause to assess economic data and see how higher rates travel through the financial system. Gold is generally sensitive to interest rates because rising prices can affect the opportunity cost of holding non-yielding bullion.
Commenting on gold’s price performance, Craig Erlam, Chief Market Analyst at OANDA said, “Gold continues its strong start to the year with another small gain on Friday, breaching the $1,900 high in the process. Overall, it is now in the middle of the $1,880-$1,920 range that has been very pivotal in recent years.”
Economic Data Outlook
Recent numbers have been generally positive, apart from the National Federation of Independent Business (NFIB) and IBD/TIPP Economic Optimism Index. Everything else has been decent: Inflation has slowed, mortgage demand has picked up, initial jobless claims are down, and exports have fallen further year-over-year.
As for other metals markets, copper futures fell to $4,191 an ounce. Platinum futures fell to $1,070.40 an ounce. Palladium futures fell to $1,771.00 an ounce.
XAU/USD gold price forecast today:
According to the performance on the daily timeframe chart, the general trend of XAU/USD gold price is still bullish.
- The breach of the psychological resistance at $1900 confirms the bulls' strong control over the gold market.
- The extended gains towards the resistance level of $1922 an ounce recently confirms the movement of the technical indicators towards strong overbought levels.
- Profit-taking sales may occur at any time.
- The closest levels of resistance to the current performance are 1928 dollars and 1942 dollars, respectively, from which I prefer to think of selling, without taking risks.
On the other hand, the first break of the trend will not occur without the XAU/USD gold price moving below the $1885 and $1845 support levels, respectively. I expect a quiet trading session today in light of the American holiday, and investor sentiment will be the first driver of the market.
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