On Wednesday (January 25), international gold prices fell, breaking away from the overnight high of $1,942.39 an ounce since late April last year, with a short-term or downward test of $1,920. As some investors locked in profits and the dollar steadied ahead of key U.S. economic data. The data could dictate the path of Fed policy tightening.
At 16:24 Beijing time, spot gold fell 0.31% to $1,930.93 an ounce; the main COMEX gold futures contract fell 0.19% to $1,931.8 an ounce; the U.S. dollar index rose 0.02% to 101.943.
“Gold’s move lower was largely due to a technical correction after hitting a high, with a stabilizing dollar also weighing on sentiment,” said Hareesh V, head of commodities research at Geojit Financial Services.
The market is currently focusing on the fourth-quarter GDP data of the United States to be released on Thursday (January 26), which is expected to be 0.6 percentage points lower than the previous value to 2.6%. The data is likely to set the tone for the Fed’s first policy meeting of the year, which runs from Jan. 31 to Feb. 2.
Ilya Spivak, global head of macro at Tastylive, said gold could rise if there are signs that the U.S. economy is slowing and that the Federal Reserve will soon slow the pace of tightening and cut interest rates. “However, for gold to break through the $2,000 level, the dollar must continue to weaken.”
Most investors expect the Fed to further slow rate hikes to 25 basis points next week. Last year, the Fed slowed the pace of rate hikes to 50 basis points in December after raising rates four times in a row by 75 basis points.
Economists at CIBC Capital Markets expect the dollar to weaken in 2023 as markets scale back expectations for the Fed’s rate peak for this cycle of rate hikes and attention is turning to policy tightening in other advanced economies.
On the daily chart, the price of gold is still in an uptrend ((3)) wave from $1,796, and is currently falling back to the 161.8% target of $1,933, with a short-term or downward test of $1,920. The ((3)) wave is the sub-wave of the upward wave III that started from $1725, and the wave III is the sub-wave of the upward wave (i) that started from $1616.