GOLD:Eyes on Fed’s Interest Rate Decision and Geopolitical...

GOLD:Eyes on Fed’s Interest Rate Decision and Geopolitical Tensions

In the recent days, gold's price has displayed a notable upward trend, marked by a bullish impulse that broke a bearish dynamic trendline. This positive momentum comes after a pullback to the 50% - 61.8% Fibonacci level, which aligns with a bullish dynamic trendline. While the precious metal is experiencing a positive rally, market uncertainty looms ahead of the Federal Reserve's (Fed) upcoming interest rate decision. In this report, we delve into the fundamental challenges facing gold and conclude with a technical analysis of its daily chart.

Uncertainty Amid Geopolitical Tensions:
The recent drone attack on a US post in Syria, attributed to an Iranian-backed militia, has heightened tensions in the region. This incident could prove to be a qualitative factor, potentially escalating tensions further. The US, vowing retaliation, faces the delicate task of responding proportionally without the situation spiraling out of control. If tensions continue to rise, gold may see an influx of safe-haven inflows in the coming days.

Fed’s Interest Rate Decision:
The dominant theme for the gold market this week revolves around the Fed's interest rate decision. While expectations lean toward the Fed maintaining the status quo, uncertainties linger regarding the tone of the accompanying statement and Fed Chairman Powell's press conference. The US economy's easing inflationary pressures, reflected in the Core PCE price index for December, and the impact on the manufacturing sector could suggest a potential shift in the Fed's tight monetary policy. Conversely, the tight US employment market might allow the Fed to keep rates higher for a more extended period. The outcome of the Fed's decision will likely influence the USD, consequently impacting gold's price.

January’s Employment Report:
A significant test awaits gold with the release of the US employment report for January. Forecasts anticipate a slight uptick in the unemployment rate to 3.8%, steady average earnings growth at 4.1% YoY, and a drop in the NFP figure to 180k compared to December. Forecasts, however, have been unreliable in the past, introducing an element of uncertainty and potential market volatility. If the data aligns with or falls short of expectations, the USD could weaken, impacting gold positively. On the other hand, better-than-expected employment figures may strengthen the USD, putting downward pressure on gold prices.

As the market navigates through geopolitical uncertainties, the Fed's decisions, and economic data, gold remains in a dynamic position, responding to various factors that shape its price trajectory. Traders and investors will closely monitor these events for cues on how gold will fare in the near term.

Our preference

Long positions Above Support Area $2000 with targets at 2068.00 & 2090.50 in extension.

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