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Asset Watch
Tuesday, September 05, 2023
Gold prices experienced a decline today, due to a firmer of the US dollar. This strengthening was influenced by investor’s betting on higher for longer US interest rates, even if the Federal Open Market Committee decides to keep rates unchanged at its upcoming meeting later this month, as some of the Fed members hinted to a possible pause.
The Federal Reserve Committee is scheduled to convene on the 19th and 20th of this month to assess whether the current interest rate, currently at 5.5%, is adequate to reduce demand levels in the US market and guide inflation towards its target of 2%.
It’s important to note that there are conflicting signals regarding the path of inflation. On the one hand, there has been a weaker US labor market, as evidenced by the number of jobs added and hourly wages, as revealed by the non-farm payrolls report for the month of August which could lead inflation levels lower. On the other hand, oil prices have continued to rise and have reached their highest levels in months that could push inflation levels higher.
Although the prevailing market sentiment suggests that the Federal Reserve will not increase interest rates at the September meeting, the upcoming US Consumer Price Index report, scheduled for release next week, will play a pivotal role in the Federal Committee’s decision-making process. It will help determine whether it is more appropriate to maintain the current policy stance or continue with interest rate hikes to address inflation concerns.
Chart source ADSS Platform
On September 1, the gold price rallied to a multi-week high at $1952/oz then retreated as some traders took profits. The price closed on a Doji-pattern reflecting reluctance from the bull’s end and a possible reversal in the upward trend. A daily close below 1933 could send the price even lower toward the support area located between 1916-11. A daily close below 1911 could encourage traders to press towards 1890.
On the other hand, a daily close above 1933 could send the price to revisit 1949 and a daily close above that level signals a possible rally towards 1974. That said, the resistance level located at 1960 should be considered.
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