Gold prices took a breather during Tuesday’s Asian session. This came after a huge rebound of more than 1.5% on Monday. What are the new market dynamics and how rapidly are they changing? Direction of next big move in gold prices likely hinges on next delayed U.S. economic data released. Investors and other stakeholders are in turn watching this development with bated breath. It will be the most important thing to determine the future course of gold.
Market pundits believe that US economic releases, as well as political developments with respect to Ukraine will continue to drive gold price in either direction. Furthermore, statements from Federal Reserve officials, commonly referred to as ‘Fedspeak’, are under scrutiny as they might shift market perceptions surrounding the Fed’s monetary policy easing.
Anticipation of Key US Data Releases
They’re dreaming of rosier economic indicators to be released later on Tuesday, including September Retail Sales and Producer Price Index (PPI). These data points are key metrics for understanding the health of consumer and producer markets, both of which play a critical role in inflation and interest rate expectations.
The Conference Board (CB) Consumer Confidence and Pending Home Sales will provide new insight. Together, these reports will improve our ability to understand where the market feels positive, negative, or uncertain. Market watchers and analysts think these reports will raise optimism for a possible Fed interest-rate cut. They could deflate those hopes.
As the gold price trades right now at $4,134.03, traders are waiting to see how the 50% retracement level at $4,133.50 holds up. If the price does not manage to push above this barrier, it may restrict further upside movements. Anything less would increase the chances of a sudden fall back toward the 21-day Simple Moving Average (SMA), now at $4,053.08.
Technical Indicators Pointing to Mixed Signals
Technical analysis shows the 21-day SMA crossing up through longer-term moving averages, a sign of a bullish turn. Yet, gold’s staying power above these moving averages is key for continuing bullish momentum. The 61.8% retracement level at $4,191.95 represents a considerable hurdle for gold prices if they are to build further advances.
The Relative Strength Index (RSI) is currently at 57.72, continuing to hold above the midline. This indicates that bullish momentum is definitely firming for gold, but traders are still skittish. A daily close above $4,191.95 would confirm that the bearish retracement is waning and could spur more bullish advance.
“US interest rates could fall without putting the Fed’s inflation goal at risk, while helping guard against a slide in the job market.” – John Williams
Market Reactions to Federal Reserve Commentary
Just as traders are trying to figure out the impact of possible economic changes, the commentary from FOMC members further complicates the way markets operate. John Williams highlighted that a reduction in interest rates could align with the Fed’s inflation targets while simultaneously protecting job stability.
San Francisco Federal Reserve President Mary Daly pushed hard for pre-emptive action. As she explained, the Fed shouldn’t refrain from cutting [rates] now because it is worried about having to backtrack down the line. Such statements reflect a growing sentiment within the Fed towards a more accommodative monetary policy that could benefit gold prices.
At the same time, mixed economic signals are creating a new dynamic on the forward-looking front, with market players left hanging on breathlessly. They look for guidance on how these factors may impact gold prices in the future.