GOLD sets new peak, be cautious in speculative buyingGold prices broke records this week, reaching $2,150/ounce. The strong recovery was fueled by a weakening U.S. dollar and falling Treasury yields on bets that the Federal Reserve could start cutting borrowing costs sooner than the Federal Reserve proposed. policy makers.
While Fed Chairman Powell has signaled that the central bank is in no hurry to cut interest rates and will need more evidence that inflation is approaching 2.0% on a sustainable basis before pulling the trigger, the Traders remain skeptical and are betting on an easing cycle starting as soon as June, partly due to a resurgence of the regional banking crisis.
The divergence between Powell's message and market expectations appears to be driving bond yields lower, reinforcing the appeal of bullion. In this context, the yellow metal tends to rise when interest rates fall, as this reduces the opportunity cost of holding non-yielding assets.
In any case, Friday's key US nonfarm payrolls report will be the final arbiter for Wall Street and the Fed. Economists predict the US economy will add 200,000 jobs in February, but cannot rule out the possibility of a bullish surprise as recent jobs data has consistently come in above estimates.
A strong jobs report could vindicate Powell's relatively hawkish stance, causing traders to ease dovish bets on the FOMC's policy direction. This scenario will weigh heavily on gold prices. Conversely, weak jobs growth could bolster confidence in an early rate cut, sending the precious metal even higher.
FORECAST OANDA:XAUUSD – TECHNICAL ANALYSIS
Gold prices surpassed December's peak of $2,150 this week, setting a new all-time high. If this bullish breakout holds in the near term, the bulls may gain the confidence to mount an attack on the trendline resistance at $2,185.
Despite bullion's positive technical outlook, caution is still needed as overbought conditions could lead to a market reversal. That means, if the sellers return, all eyes will be on the $2,150 level. Below this area, there is a lack of significant support until the $2,090 level, increasing the risk of a deep retracement in the event of a breakdown. Further down, the focus turns to $2,065, followed by $2,040.
