International gold prices rose on Thursday (February 23), driven by a slight fall in the U.S. dollar, but the U.S. federal funds rate is expected to remain high for a longer period of time, limiting the upside of gold prices. If it is unable to stand above $1,850 as soon as possible, the price of gold is expected to resume its downward trend.
At 14:51 Beijing time, spot gold rose 0.37% to $1,831.92 an ounce; the main COMEX gold futures contract fell 0.10% to $1,839.5 an ounce; the U.S. dollar index fell 0.18% to 104.340.
Minutes of the Federal Reserve’s latest policy meeting released on Wednesday (February 22) showed that policymakers agreed that they need to keep raising interest rates, but a slower pace of hikes would allow them to more closely adjust to incoming economic data.
Brian Lan, managing director at Singapore-based dealer Gold Silver Central, said: “The Fed says they’re still looking at raising rates to fight inflation, just not as aggressively as before…but if the data shows inflation rising instead of falling, we might see gold There’s a sell-off.”
A flood of data in recent weeks has suggested the U.S. economy remains resilient, fueling concerns that the Federal Reserve will continue to tighten monetary policy. Investors will now focus on U.S. personal consumption expenditures (PCE) data, the Fed’s preferred inflation gauge, due on Friday (Feb. 22).
St. Louis Fed President Bullard reiterated on Wednesday that a rise in the Fed’s policy rate to a range of 5.25% to 5.5% would be enough to curb inflation. The interest rate futures market expects the federal funds rate to peak at 5.362% in July and remain above 5% for the year.
Strategists at Commerzbank now expect gold to fall towards $1,800 in the first half of the year before recovering to $1,950 by the end of the year. “In the short term, gold prices are likely to remain under pressure as US economic activity continues to be strong and inflation only slowly declines, both of which support US rate hike expectations. Once US rate hikes are clearly nearing the end, gold’s appeal should slowly rise again. We have lowered our gold price forecast for the first half of the year from $1,850 to $1,800. However, we remain optimistic for the second half of the year and continue to expect a gradual rise towards $1,950.”
On the daily line, the price of gold is in the downward wave II trend since $1960, and is currently hovering around $1828, which is the 38.2% Fibonacci retracement of the upward wave I. If the price of gold cannot reach $1,850 as soon as possible, the downward adjustment trend will continue, and the market outlook may further drop to $1,788, which is the 50% Fibonacci retracement level of wave I. Both wave II and wave I are sub-waves of the upward (V) wave that started at $1615.