jlk – Gold, the precious metal that always attracts investors’ attention, has strengthened again in recent days.
After briefly touching a three-week low around $1,973 per troy ounce, the spot gold price (XAU/USD) has managed to recover and recorded gains for the second consecutive day on Thursday, February 22, 2024.
What is driving the increase in the price of gold? One of the main factors is the dovish or accommodative stance of the Federal Reserve, the central bank of the United States.
In the minutes of its latest monetary policy meeting released on Wednesday.
The Fed reiterated that it would maintain benchmark interest rates near zero and asset purchase programs worth $120 billion per month until the US economy recovers from the impact of the Covid-19 pandemic.
The Fed’s stance has weighed on the value of the US dollar, which moves inversely to the price of gold.
The US dollar index, which measures the greenback’s strength against a basket of major currencies, fell 0.3% on Thursday and was below the 90 level.
The US dollar also weakened against the Indonesian rupiah, which strengthened 0.2% to Rp 14,050 per US dollar.
Furthermore, the price of gold also received support from decreased risk sentiment in the global stock markets.
The Dow Jones Industrial Average and S&P 500 indexes on Wall Street closed lower on Wednesday, while the Nikkei 225 index in Tokyo and the Hang Seng index in Hong Kong also ended in the red on Thursday.
Uncertainty about the global economic recovery, the spread of new coronavirus variants, and geopolitical tensions between the US and China are some of the factors that have triggered selling in the stock markets.
In such conditions, gold becomes one of the assets sought by investors as a store of value or safe haven.
Gold is also considered a hedge against inflation, which is feared to increase due to massive fiscal and monetary stimulus.
However, will the rise in the price of gold continue?
From a technical standpoint, the price of gold still faces strong resistance around the $2,032 area, where there is a downward trend line drawn from last year’s highs and the 50-day simple moving average (SMA).
If the price of gold manages to break through this resistance, then the potential for further gains towards $2,065 will be open.
Conversely, if the price of gold fails to break through this resistance and turns lower, then the nearest support is at the $2,005 level, followed by $1,990.
If the price of gold continues to weaken and breaks below this support, then it may likely return to the $1,975 level, where the 200-day SMA is located.
Fundamentally, the price of gold will also be influenced by economic data to be released in the coming days, especially US inflation data scheduled for release on Tuesday, February 27, 2024.
This data will provide clues about price pressures in the US and market expectations for Fed policy.
If US inflation data is higher than expected, the US dollar could strengthen and pressure the price of gold.
Conversely, if US inflation data is lower than expected, the US dollar could weaken and support the price of gold.
That’s the article I’ve written about the price of gold. I hope it’s helpful and informative. Thank you for reading.