Dovish Fed Sends Gold Prices to New Records

Gold prices surged by 2.4% to reach $2205 per troy ounce, reaching a new all-time high of $2222. This upward momentum followed a consolidation period around $2150 for ten days. Investors closely monitored the Federal Reserve's monetary policy decisions, interest rate projections, and economic forecasts.

With higher inflation in the United States and a mild cooling of the labor market in January and February, expectations aligned with the December interest rate outlook, which projected three interest rate cuts in 2024. However, only two cuts were confirmed due to the strength of the American economy. As a result, bets for a cut in May plummeted to 8.0-9.0%, while doubts emerged regarding a cut in June, with bets decreasing to 52.0%. These developments heightened the risk of a stock market correction and potential downward pressure on gold prices.

In response, the Federal Reserve adopted a dovish stance, maintaining its forecast for three interest rate cuts in 2024 and signaling a slowdown in Fed balance sheet tightening. While this combination may be controversial, it allows the Fed greater flexibility in navigating economic challenges.

Despite the Fed's dovish stance, U.S. 10-year Treasuries yields retreated slightly to 4.23% from 4.34%, reflecting cautious optimism among large investors regarding the strength of the American economy.

The SPDR Gold Trust (GLD) reported net capital inflows in the last two weeks of $1.2 billion and $400 million, respectively. This suggests that investors were uncertain about the sustainability of further increases in bullion prices. From a technical standpoint, gold prices are currently testing resistance at $2200-2220 per ounce. However, it is unlikely that this resistance will be breached before the end of the technical weakness period for gold, which is expected to last until the end of April. A retreat to $2100-2120 per ounce is considered more plausible. In the event of an upside breakthrough, the next resistance level is located at $2300 per ounce.