Gold prices experienced a second consecutive day of decline, dropping to $2,159 from their peak of $2,223, which marked an all-time high. Despite the Federal Reserve maintaining a dovish stance on interest rates, US Treasury bond yields fell, except for the US Dollar, leading to renewed demand for the Greenback.
The likelihood of a Fed rate cut in June remains above 70%, according to the CME FedWatch Tool. Gold prices fell on Friday as traders took profits, causing a $36 decline and finishing the day with a 0.22% loss, trading at $2,159.
Despite recent inflation reports suggesting a resurgence, the Federal Reserve’s emphasis on the need to lower interest rates initially drove Gold prices to new highs. However, this upward movement was short-lived.
Although the US Dollar experienced a two-day rally, US Treasury yields failed to rise. The lack of economic data ahead of the weekend kept markets relatively calm.
In the daily market digest, Jerome Powell reiterated the Fed’s progress in controlling inflation, maintaining the Dot Plot for 2024 unchanged while revising the 2025 projection upward. The FOMC forecasts a 2.1% growth rate for the economy in 2024, with an unchanged unemployment rate of 4%. Inflation figures, particularly the Personal Consumption Expenditures (PCE), are now closely watched, with expectations at 2.4%. Despite solid jobs market data, the economy faces challenges like the revealed slowdown in S&P Global PMIs.
Technical analysis indicates that Gold traders failed at the $2,200, exposing the $2,180 level. If prices fall below $2,150, a decline toward the December 28 high-turned-support at $2,088 is likely. Key support levels, including the December 4 high turned support at $2,146, must be broken before challenging the $2,100 mark. Conversely, a push towards $2,200 would expose the current all-time high at $2,223, with further potential toward $2,250.