Gold prices have taken a downward turn as traders engage in profit-taking ahead of significant economic data releases from the United States. This week, the S&P Global Preliminary business Purchasing Managers' Indexes (PMIs) are poised to influence the trajectory of gold prices. Recently, gold failed to maintain its position above the $2,950 mark, leading to a potential test of the $2,900 support level. If breached, this could pave the way for a further decline towards the February 14 low of $2,877.
The anticipation surrounding the US Personal Consumption Expenditures (PCE) inflation data release next week has prompted traders to reconsider their long positions. This recalibration could extend gold's correction from its lifetime highs. However, should fresh developments emerge regarding US President Donald Trump's tariff plans, these could bolster the safe-haven demand for gold, potentially mitigating adverse reactions to strong PMI data.
Despite the recent pullback, gold remains on a path to secure its eighth consecutive weekly gain. The 14-day Relative Strength Index (RSI) has returned to a bullish zone, currently hovering near 69.75. This positioning suggests that traders might consider adopting a 'buy-the-dips' strategy for gold.
A sustained breakthrough above the $2,950 barrier could reignite the record rally in gold prices. Key resistance levels lie at $2,970 and the psychologically significant $3,000 mark. However, if the $2,900 level is decisively broken, it could trigger a fresh downside move toward the $2,850 psychological threshold.
The Federal Reserve's approach to interest rate decisions is expected to be influenced by the upcoming PMI data. The Fed Minutes from the January policy meeting did not alter expectations of two rate reductions this year. Despite this, there is speculation that the Fed might cut rates more than anticipated, as observed in the UK.
"Many participants noted that the committee could hold the policy rate at a restrictive level if the economy remained strong and inflation remained elevated." – The Minutes
The attractiveness of US repo rates and the anticipated appreciation of bills further add complexity to the market's outlook. As traders navigate these dynamics, the gold market remains sensitive to shifts in US economic policies and global economic conditions.