Gold Sideways:
Gold price is navigating a complex interplay of geopolitical events and economic indicators, leading to a nuanced investor sentiment. Despite geopolitical tensions in the Middle East and China's economic challenges, Gold's bullish conviction is tempered.
The recent joint US-UK airstrikes against Iran-backed Houthis in Yemen have heightened concerns about conflicts in the region. Simultaneously, Pakistan and Iran opt for diplomatic resolution, presenting a contrast in regional dynamics. The Israel-Hamas conflict looms large, posing a potential threat to the global economy.
Investors are recalibrating their expectations for Federal Reserve policy, signaling a shift from earlier anticipations of a more aggressive stance. The market now reflects a 40% chance of a March rate cut, down from 80% a week ago. Projections for five 25 basis points rate reductions in 2024 have decreased compared to two weeks ago.
The benchmark 10-year US government bond yield hovers just below its December peak, influencing the US Dollar and potentially capping the Gold/USD pairing. The Bank of Japan's decision to maintain its ultra-loose monetary policy aligns with expectations and adds another layer to the global economic landscape.
Technical analysis unveils a critical juncture for Gold. The $2,040-2,042 supply zone emerges as a pivotal point, presenting a barrier to further upside momentum. A decisive breach could trigger a short-covering rally, propelling Gold towards $2,077 before targeting the psychological $2,100 mark.
Conversely, downside protection lies around the overnight swing low near $2,017-2,016. A breach of this support opens the door to the $2,000 psychological level, signaling a potential downtrend. Further declines may target the $1,988 intermediate support, with a potential extension towards the 100-day Simple Moving Average (SMA) around $1,972 and the 200-day SMA in the $1,964-1,963 zone.
As traders eagerly await the European Central Bank (ECB) meeting, global Purchasing Managers' Index (PMIs), Advance US Q4 GDP, and the US Core Personal Consumption Expenditures (PCE) Price Index, the market remains poised for potential directional shifts.
