Gold trade: Is the Outlook too Pessimistic?

1월 18일

A few weeks ago, there was widespread belief in the markets that the U.S. central bank would implement more than 160 basis points of easing in 2024. However, these expectations have substantially moderated since then, leading to a bearish reversal in the gold market.

Even today, Atlanta Federal Reserve President Raphael Bostic emphasized that he anticipates policymakers will only commence rate cuts in the third quarter of this year. Additionally, the recent report from the Labor Department revealed that initial jobless claims hit their lowest level since September 2022, indicating a tight labor market and diminishing the need for immediate rate cuts.

The current week's sell-off has pushed the spot price below both the 20- and 50-day simple moving averages, intensifying the negative sentiment. While technical indicators have weakened in their bearish stance and fall short of suggesting a bottom, they still remain in negative territory.

The next level of support lies at $2,009/oz., followed by $1,987/oz. Taking an overly optimistic perspective in the long term, gold might remain positive as long as the last higher low at $1,973/oz. is maintained. The pair recovering beyond $2,040 will help it regain some bullish strength, but with no obvious reason for it to move back to this level, this might be overly optimistic too.