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Gold Prices Rise Slightly, Fed’s Decision to be Announced Soon

Gold Trading Alert: Gold prices hit two-week high before retreating on strong U.S. job openings data, awaiting Fed decision

On Tuesday (January 30), gold prices rose slightly, but fell back from the day’s high. After hitting a two-week high near $2,050 an ounce earlier in the day, gold prices turned below the $2,040 an ounce mark. After the U.S. released the data, the 2-year U.S. Treasury yield rose about 4 basis points, causing gold prices to erase most of their daily gains. At the same time, safe-haven demand is more moderate due to changes in the situation in the Middle East. Market focus turns to the Federal Reserve policy meeting, with investors wondering when rate cuts will begin this year.

(Spot gold trend chart)

Spot gold closed up 0.19% at $2,036.81 per ounce.

The settlement price of COMEX April gold futures closed up 0.31% at $2,050.9 per ounce.

The settlement price of COMEX March silver futures closed down 0.11% at $23.225 per ounce.

[Market News Analysis]

Gold prices continue to rise amid an escalating crisis in the Middle East. Still, gold prices moved within a narrow range as investors awaited a Federal Reserve interest rate decision due to be announced on Wednesday and the market was reluctant to take risks.

The 2-year U.S. Treasury yield rose about 4 basis points as job vacancy data during the Federal Reserve policy meeting weakened expectations for an FOMC rate cut. In late New York trading, the U.S. 10-year benchmark Treasury bond yield fell 1.73 basis points to 4.0567%. After the release of U.S. job vacancy data, it rebounded from 4.04% and rose to a daily high of 4.1007%. European stocks fell five minutes before the opening. It ended at a low of 4.0338%. The 2-year U.S. Treasury yield rose 3.92 basis points to 4.3572%, off the daily high of 4.3861%. It fell to a daily low of 4.2850% one minute before the release of the U.S. job vacancy data, but quickly rose and turned higher after the data was released. The three-month Treasury bill/10-year U.S. Treasury yield spread fell 1.489 basis points to -130.453 basis points. The 02/10-year U.S. Treasury yield spread fell 5.015 basis points to -30.256 basis points. The yield on the 10-year U.S. Treasury Inflation-Protected Securities (TIPS) rose 0.78 basis points to 1.7921%.

Traders believe the Fed will keep interest rates in a range of 5.25%-5.50% as price pressures continue to ease. Investors will be watching to see when Fed policymakers are willing to start cutting interest rates. The Fed is not yet convinced that underlying inflation will return to 2% on a sustained basis due to strong labor demand, strong retail sales and a generally optimistic economic outlook.

According to the latest data from CME’s “Fed Watch”, the probability that the Federal Reserve will keep interest rates unchanged in the range of 5.25%-5.50% in February is 97.9%, and the probability of cutting interest rates by 25 basis points is 2.1%. The probability of keeping interest rates unchanged by March is 58.3%, the probability of a cumulative 25 basis point interest rate cut is 40.9%, and the probability of a cumulative 50 basis point interest rate cut is 0.8%.

Ricardo Evangelista, senior analyst at ActivTrades, pointed out that the Federal Reserve’s monetary policy stance is the most important driving factor for gold prices currently. Even the safe-haven appeal of precious metals cannot withstand expected changes in the market around central bank monetary policy, he said.

Gold prices have been trading above the $2,000/ounce mark since mid-December. Commerzbank strategists analyze the outlook for gold. They expect the Federal Reserve to cut interest rates significantly this year. “Beyond this short-term outlook, the direction of U.S. monetary policy will be decisive for the further development of gold prices,” they said. “As such, the Fed’s wording and Chairman Powell’s press conference following Wednesday’s Fed meeting are likely to be important. We expect “Significant interest rate cuts are expected during the year, and gold prices will rise again.” They said, “Gold prices fell to $2,010 an ounce last week, but XAU/USD remained surprisingly strong.” They expect gold prices to defy investor headwinds. Gold ETFs tracked by Bloomberg have recorded outflows for eight consecutive trading days. Since the beginning of the year, with two exceptions, there have been only ETF outflows. The last time monthly outflows were strong was in September. The scaling back of expectations for a rate cut from the Fed that had been exaggerated in recent weeks may be one reason. Speculative financial investors also faced selling pressure. Their net long position fell to 61,000 contracts in the last reporting week ended January 23, the lowest level in three months, according to CFTC data. Over the past three reporting weeks, positions have been reduced by 44%, equivalent to the sale of 150 tons of gold in the futures market. “

Michele Schneider, director of trading education and research at MarketGauge, said in a recent interview with Kitco News that while she is bullish on gold and silver in the new year, the precious metals market may see some volatility and weakness in the first half of the year. “Right now, what we’re seeing is more of a correction. I don’t think it’s a huge change,” she said. “That’s why the Fed is so two-sided on monetary policy, because there’s a reason to lower rates and there’s a reason to keep them higher for a long time.” level.”

In an interview with Kitco News, Evangelista said he expects gold prices to hit a high of around $2,200 an ounce, with an annual average price of $2,100 an ounce.

[Wednesday’s trading day focuses on financial data and events (Beijing time)]

①07:50 The Bank of Japan releases a summary of the review committee’s opinions in March
②08:30 Australia’s fourth quarter CPI annual rate, Australia’s December non-seasonally adjusted CPI annual rate
③09:30 China’s official manufacturing PMI in January
④15:00 UK January Nationwide house price index monthly rate
⑤15:30 Swiss actual retail sales annual rate in December
⑥15:45 France January CPI monthly rate
⑦16:55 The number of unemployed people and unemployment rate in Germany after seasonal adjustment in January
⑧17:00 Swiss ZEW Investor Confidence Index in January
⑨21:00 Initial value of German CPI monthly rate in January
⑩21:15 U.S. ADP employment numbers in January
11. 21:30 Canadian November GDP monthly rate, US fourth quarter labor cost index quarterly rate
12. 22:45 Chicago PMI in January, United States
13. 23:30 EIA crude oil inventories in the United States for the week to January 26, EIA Cushing crude oil inventories in the United States for the week to January 26, and EIA Strategic Petroleum Reserve inventories in the United States for the week to January 26
14. The Federal Reserve announced its interest rate decision at 03:00 the next day.
15. At 03:30 the next day, Fed Chairman Powell held a press conference
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2024-01-30 23:29:00

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