Gold Price Forecast: XAU/USD Eyes A Fresh Uptrend On A Sustained Move Above $2,035

Forex

Summary:

Gold price regains upside traction on Thursday after a muted close on Wednesday.US Dollar and US Treasury bond yields stay defensive amid hawkish Fed Minutes and upbeat mood.

Gold price has resumed its bullish momentum near $2,030 early Thursday, having paused its recovery rally on Wednesday. A risk-on market environment is acting as a headwind for the US Dollar, despite the hawkish US Federal Reserve (Fed) January meeting Minutes.

Gold price eyes PMI data

Asian markets are trending higher, with Chinese stocks supported by the latest policy support measures and the latest ban on major institutional investors from selling equities at the open and close.

The sentiment also remains underpinned by the American tech-giant Nvidia’s encouraging earnings result, posted after the Wall Street closing bell on Wednesday. Nvidia posted $5.16 earnings per share (EPS) vs. $4.64 expected while revenue stood at $22.10 billion vs. $20.62 billion expected. The AI pioneer said that it expected $24.0 billion in sales in the current quarter.

Against a better market mood, as reflected by a 0.74% gain in the US S&P 500 futures, the US Dollar is keeping its downbeat tone intact, allowing Gold price to regain the recovery momentum.

Gold price reversed early gains on Wednesday and tested the $2,020 support area before staging a modest to close the day flat. Gold sellers returned after the Minutes of the Fed’s January meeting stated, “most participants noted the risks of moving too quickly to ease the stance of policy and emphasized the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to 2 percent.”

The Fed Minutes were read as hawkish but failed to have any lasting positive impact on the US Dollar. Therefore, Gold price managed to settle Wednesday at $2,025.

Markets are currently pricing in just about a 30% chance that the Fed could begin easing rates in May, much lower than an over 80% chance a month ago, according to the CME FedWatch Tool. For the June meeting, the probability for a rate cut now stands at 70%, down from 77% seen a day ago.

With the Fed Minutes out of the way, attention turns toward the preliminary readings of the Eurozone, UK and US business PMIs due later on Thursday. The PMI data is likely to have a significant impact on the broad market sentiment if the Eurozone PMIs indicate a potential recession while the US PMI data could squash hopes of an economic ‘soft-landing’.

That said, the further upside in the Gold price remains at the mercy of the risk sentiment, US data and Fedspeak.

Gold price technical analysis: Daily chart

As observed on the daily chart, Gold price is consolidating the upside near multi-day highs before breaking higher through the crucial 50-day Simple Moving Average (SMA) hurdle at $2,035.

The technical setup remains in favor of further upside, especially after the Gold price confirmed a falling wedge breakout above the descending trendline resistance of $2,018 earlier in the week.

Gold buyers will need to find a strong foothold above the 50-day SMA at $2,035 to aim for the February 7 high of $2,044, followed by the $2,050 psychological barrier.

The 14-day Relative Strength Index (RSI) sits just above the midline, backing the bullish potential in Gold price.

On the contrary, if Gold buyers face rejection at the 50-day SMA, the 21-day SMA at $2,023 will be back on the sellers’ radars. A failure to defend the latter could fuel a fresh downswing toward $2,005, the confluence of the wedge resistance-turned-support and the upward-pointing 100-day SMA.

Ahead of that, Tuesday’s low of $2,015 could come to the rescue of Gold optimists.

Source：FXStreet

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Remarks of Officials

The Federal Reserve released the minutes of its January monetary policy meeting on February 21, local time, the main content of which is as follows.

U.S. GDP grew solidly in the fourth quarter of last year, but the growth slowed slightly from the strong pace in the third quarter. Labor market conditions continued to be tight but showed signs of further easing, and labor supply and demand continued to come into better balance. In the last few months of 2023, wage growth remained strong but at a slower pace than a year ago. The unemployment rate remained at a low level. A few participants judged that further increases in labor supply may be limited, pointing, for instance, to the decline in labor force participation in December. While labor market conditions were generally seen as strong, several participants noted that recent job gains were concentrated in a few sectors, which, in their view, pointed to downside risks to the outlook for employment.

Participants expected a further slowdown in wage growth and a gradual decline in core nonhousing services inflation. Various participants noted that housing services inflation was likely to fall further as the deceleration in rents on new leases continued to pass through to measures of such inflation.

Participants judged that the policy rate was likely at its peak for this tightening cycle. Participants noted that the future path of the policy rate would depend on incoming data, the evolving outlook, and the balance of risks. Participants generally did not expect it would be appropriate to reduce interest rates until they had gained greater confidence that inflation was moving sustainably toward 2%. In addition, members agreed to continue to reduce the Federal Reserve's holdings of Treasury securities, agency debt, and agency mortgage-backed securities. All members affirmed their strong commitment to returning inflation to the Committee's 2% objective.

Some participants noted that the progress of disinflation could stall, especially if aggregate demand strengthened or the supply side recovered more slowly than expected. Most participants pointed to the risk of cutting interest rates too quickly. Some noted downside risks to the economy associated with maintaining an overly restrictive stance for too long.

Balance sheet runoff is progressing well. In light of ongoing reductions in usage of the overnight reverse repurchase agreement (ON RRP) facility, many participants suggested that it would be appropriate to slow the pace of runoff, and slowing the pace of runoff could help smooth the transition to the appropriate level of reserves.

Minutes of the Fed's January Meeting

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Cohen

Economic

Indian business activity expanded at its fastest pace in seven months in February as demand remained strong for both manufacturing and services, according to a business survey released on Thursday, which also showed an easing in price pressures.

That supports the findings in a Reuters poll which found India, the fastest growing major economy, is expected to continue to grow at a steady pace over the coming years.

HSBC's flash India Composite Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 61.5 this month from January's final reading of 61.2, staying above the 50-mark that separates expansion from contraction for a 31st straight month.

"The pace of acceleration in the output of India's manufacturers and service providers, combined, was at a 7-month high in February. Encouragingly, new export orders rose sharply, particularly for goods producers," noted Pranjul Bhandari, chief India economist at HSBC.

The flash manufacturing PMI for February rose to 56.7 from last month's 56.5, its highest since September, and the preliminary services PMI was at a seven-month high of 62.0 from 61.8 in January.

New orders across the private sector continued to rise at a robust pace driven by demand in the dominant services industry, which expanded at the fastest pace since mid-2010. Factory output accelerated to a five-month high.

Overall international orders increased at the quickest pace since September.

That bolstered the view for the coming 12 months with optimism among manufacturers at the highest since December 2022. However, overall business confidence slipped from January's four-month high.

However, employment didn't increase for the first time since May 2022.

Although services companies noted a stronger increase in cost burdens than manufacturers, the flash data showed a moderation in cost pressures. Overall input prices rose at the weakest pace in three-and-a-half years."Producers were able to do both - lower the rate of increase in output prices and improve margins," added Bhandari.That would likely provide comfort to the Reserve Bank of India, which is expected to keep its key repo rate unchanged before a first cut in the July-September quarter.

Source：TheEconomicTimes

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Alex

Commodity

Crude oil futures traded higher on Thursday as the market foresees strong demand outlook in the near term.

At 9.53 am on Thursday, April Brent oil futures were at $83.20, up by 0.20 per cent, and April crude oil futures on WTI (West Texas Intermediate) were at $78.08, up by 0.22 per cent.

March crude oil futures were trading at ₹6,477 on Multi Commodity Exchange (MCX) during initial trading against the previous close of ₹6,447, up by 0.47 per cent, and April futures were trading at ₹6,468 as against the previous close of ₹6436, up by 0.50 per cent.

US inventories rise

Market reports noted that restarting of some US refineries that were affected by outages earlier is boosting the demand for the commodity.

According to reports, the 4,35,000 barrels per day refinery of BP in Indiana, which was affected by power outages in the beginning of February, is likely to restart its full production from March. The 2,38,000 barrels per day refinery of Total Energies in Texas, which has been conducting minimal operations due to outages, is also gearing up for a complete restart.

Crude oil inventories in the US had seen a huge build last week, and the issues related to outages were seen as one of the main reasons for build there.

The latest data from the industry body American Petroleum Institute (API) showed an increase in the crude oil inventories for the week ending February 16. According to API, crude oil inventories in the US went up by 7.16 million barrels for the week ending February 16. Market was expecting it to go up by 4.29 million barrels during the period.

Meanwhile, minutes of the January meeting of the US Federal Reserve showed that policymakers are worried about cutting the interest rates too soon. Minutes of the meeting, which was released on Wednesday, said that participants highlighted the uncertainty associated with how long a restrictive monetary policy stance would need to be maintained to return inflation to the target of 2 per cent. A high interest rate scenario would impact the demand for commodities such as crude oil in the market.

Kapas gleams, turmeric fades

February aluminium futures were trading at ₹197.95 on MCX in the initial trading hour of Thursday morning against the previous close of ₹199.30, down by 0.68 per cent.

On the National Commodities and Derivatives Exchange (NCDEX), April kapas contracts were trading at ₹1,569 in the initial trading hour of Thursday morning against the previous close of ₹1,560, up by 0.54 per cent.

April turmeric (farmer polished) futures were trading at ₹15,360 on NCDEX in the initial trading hour of Thursday morning against the previous close of ₹15,434, down by 0.48 per cent.

Source：TheHinduBusinessLine

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Alex

Economic

Stocks

The volatility of the Indian stock market has increased in the last month. It is a combination of both global and domestic factors. Globally, speculation surrounding the timing and magnitude of the season's first Fed rate cut, coupled with selling pressure from FIIs in emerging markets, plays a pivotal role. Domestically, factors such as Q3 results announcement, Budget implications, pre-election rally, and high level of margin trading contribute significantly to the heightened market fluctuations.

The RBI opted to keep the repo rate steady at 6.5%, with a focus on withdrawals of accommodation, thereby tempering anticipations of an early interest rate decrease. Optimistic projection of a robust 7% economic growth for FY25, driven by enhanced manufacturing, strong construction sector, and a gradual revival in rural areas did help the stock market. While lack of measures to increase the liquidity in the banking system impacted the stock market performance in between.

The market has overcome the challenges and returned to the new zone trajectory. Nifty50 has held above 22, mirroring the positive sentiment prevailing in the global market. Despite the broad-based recovery, caution is aired, and market participants are more inclined towards quality large-cap stocks owing to the prevailing valuation gap. Though, mid & small caps have outperformed in the last one month, the degree of outperformance has reduced. We prefer large caps as a medium-term investment pattern.

The interim budget had outlined measures designed to stimulate economic. There was a notable focus on infrastructure, although slightly lower than anticipated ( ₹11.11 lakh crore in FY25). Since 2014, the Government of India has accorded significant importance to infrastructural and developmental initiatives. The same is evident in sectors like cement, which have experienced steady growth over the past 5–6 years. In addition, future attention is directed towards green energy, renewables, and manufacturing. The key beneficiaries are likely to be electronic and electrical products, with a focus on mass production like exports.

Beside infrastructure spending, the Production-Linked Incentive (PLI) schemes stand out as a pivotal initiative. These schemes are geared towards promoting domestic manufacturing, with the government aiming to allocate around Rs. 2 trillion in incentives. Currently, out of the targeted capital expenditure of Rs. 5 trillion, represents approximately 1.7% of the GDP for FY23. The government has garnered investment commitments totalling Rs. 3 trillion from 733 applicants.

The purpose of the PLI Schemes is to attract investments in key sectors and cutting-edge technology, ensure efficiency and bring economies of size and scale to the manufacturing sector, and make Indian companies and manufacturers globally competitive. Over the next five years, these schemes have the potential to substantially amplify production, job creation, and overall economic expansion. It is expected that these schemes will facilitate the creation of 6 million new jobs.

However, in the current short-term scenario, volatility is expected to rise as the upcoming major event of the election draws closer. India VIX index has increased to 15.2x from 13.5x month back. The ongoing robust pre-election rally, is forecasted to continue until the day of the election results, may take a breath. Corporate Q3 results are healthy and in-line with expectations nevertheless indicating a slowdown in earnings growth on a quarter-on-quarter basis. Similarly, the forecast for FY25 is moderate compared to FY23–24. The recent volatility in the global market has increased, mainly on speculation surrounding a possible US Fed rate cut in May. These factors will play a crucial role in determining domestic market movements in the short term, particularly given the high valuations.

Source:mint

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Stocks

Economic

Japan's Nikkei share average climbed to the cusp of an all-time peak on Thursday after unexpectedly strong revenue forecasts from US chip designer Nvidia lifted Asian tech stocks.

However, the regional mood was tempered by a retreat in Chinese stocks from multi-month highs reached amid Beijing's efforts to boost market confidence.

Long-term US bond yields hugged three-month highs while the dollar sagged after minutes from the last Federal Open Market Committee meeting confirmed the view that interest rate cuts would be slow in coming, but weren't markedly more hawkish that the Fed's previously expressed views.

The Nikkei 225 share average pushed as high as 38,924.88 for the first time since January 1990 - right when the so-called bubble economy peaked - before entering the midday recess up 1.7 percent from Wednesday at 38,913.84. Its all-time high is 38,957.44 set on Dec. 29, 1989.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.07 percent, with a 0.71 percent rise for Taiwan's stock benchmark countered by losses in Hong Kong.

The Hang Seng slipped 0.41 percent, threatening to snap a seven-day winning streak. A subindex of tech shares slumped 0.84 percent.

Mainland blue chips oscillated throughout the session between small gains and losses.

Meanwhile, US stock index futures signaled gains, following a mixed session on Wednesday for the main benchmarks. S&P 500 futures rallied 0.75 percent and tech-focused Nasdaq futures jumped 1.39 percent.

Following the closing bell overnight, Nvidia forecast a roughly 233 percent surge in quarterly revenue, sending its shares up some 10 percent after-hours.

The Nikkei has jumped about 16 percent already this year, with the S&P 500 and Nasdaq rallying some 5 percent each, driven in large part by mammoth expectations for artificial intelligence (AI), with Nvidia's chips at the center of that boom.

"Nvidia's earnings beat boosted sentiment and eased concerns over stretched valuations, providing room for the AI theme to continue to drive markets," Saxo Markets analysts wrote in a research note.

The 10-year US Treasury yield eased slightly in Asian time on Thursday to 4.3068 percent, close to the 4.332 percent level marked a week ago and which had not been seen since the end of November.

The bulk of policymakers at the US Federal Reserve's last meeting in January were concerned about the risks of cutting interest rates too soon, with broad uncertainty about how long borrowing costs should remain at their current level, minutes released on Wednesday showed.

That reinforced the view among traders that any rate cut is not imminent, with market pricing suggesting one-in-three odds for a first reduction in May, according to CME Group's Tool.

The dollar continued to retreat from a three-month high reached last week, when the US dollar index, which tracks the currency against six major peers, reached 104.97. It was flat at 103.99 in early trading on Thursday.

The euro was little changed at $1.08195, while the yen was steady at 150.345 per dollar.

Elsewhere, oil prices rose slightly, adding to gains from the previous session that came amid signs of tighter supply.

US West Texas Intermediate crude futures (WTI) rose 17 cents to $78.08 a barrel for the prompt month. The May contract gained 14 cents to $77.45 a barrel by 0150 GMT.

Brent crude for April delivery ticked up 14 cents to $83.17 a barrel, while the May contract added 13 cents to $82.24 a barrel.

Oil prices rose 1 percent on Wednesday, with refinery restarts in the United States supporting demand after a series of outages earlier cut US refinery utilization rates to the lowest level in two years.

Source：TheJakartaPost

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Remarks of Officials

Economic data have become less reliable since the outbreak of the pandemic and prone to larger revisions than usual, Federal Reserve Board Governor Michelle Bowman said on February 21 (ET) when she participated in a discussion "A View from the Federal Reserve". She said Fed officials want to wait for more information to confirm the economy is softening and that inflation is slowing toward the Fed's 2% goal.

It will be time at some point to begin the process of lowering rates, but given the uncertainty in the data, it's certainly not now. There is plenty of time for us to get more confidence in where the economy is heading.

Richmond Fed President Thomas Barkin also delivered a speech on the same day, saying that recent economic data suggests while overall U.S. inflation has improved, price pressures in some sectors remain too high.

January inflation rose faster than expected. Although the year-on-year rate of increase fell, the rising shelter costs and service prices far offset this decline. This complicates the upcoming interest rate decision.

The slowdown in inflation relies on falling commodity prices, but at this stage, shelter and services inflation remains sticky. "You do worry that when the goods price deflation cycle ends, you're going to be left with shelter and services higher than you like it," Barkin said.

Barkin is paying more attention to the 1-month and 3-month inflation indicators than to the year-on-year data. He expected prices to continue to rise.

Barkin did not reveal his thoughts in the interview about how long the current high interest rates will stay. As a voting member this year, he is very cautious in that regard.

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