As the U.S. Consumer Price Index (CPI) for January exceeded expectations, market forecasts for the Federal Reserve’s future monetary policy shifted, causing the U.S. Dollar Index to rise rapidly and leading to a pullback in gold prices. However, despite this pressure, the gold market still shows potential for growth, primarily supported by safe-haven demand, central bank purchases, and geopolitical risks. Against this backdrop, analyzing gold trends has become particularly important for investors. Observing key support and resistance levels may reveal new trading opportunities amid future price fluctuations.
The U.S. CPI data for January revealed significant inflationary pressure, with the index showing a year-over-year increase of 3.0%, up from December’s 2.9% and surpassing market expectations of 2.9%. The core CPI, which excludes food and energy, rose by 3.3% year-over-year, also exceeding the market forecast of 3.1%. These figures indicate that U.S. inflation is not yet effectively under control, intensifying its impact on Federal Reserve policy. Fed Chair Powell has emphasized the U.S. economy’s resilience but noted that inflation has not reached a level that would permit a rapid easing of policy. This has further fueled market expectations for Fed rate hikes, leading to a short-term surge in the dollar and putting pressure on gold.
However, despite the pullback in the gold market, the demand for gold as a safe-haven asset remains strong amid the current global political and economic landscape. In particular, geopolitical risks in the Middle East and sustained demand for gold from major central banks worldwide provide support for its price.
Despite rising expectations for interest rate hikes, gold prices have still shown some recovery momentum. Geopolitical events worldwide, especially the uncertainty in the Middle East, continue to drive strong demand for safe-haven assets. Furthermore, major central banks are consistently increasing their gold reserves, which not only helps diversify risk but also provides a reliable floor for the gold price.
For example, the recent rise in gold lease rates in India indicates that global demand for gold remains robust. These factors suggest that gold still has rebound potential after a short-term pullback.
From a technical perspective, the gold market is showing a corrective pullback. Although short-term expectations of a Fed rate hike are suppressing the price, gold remains in a relatively strong range when looking at the long-term technical patterns and the balance between bullish and bearish forces. If the price can stabilize near key support levels, it may still have the potential to challenge previous highs.
In the current market, $2,875 is considered a crucial support level for the price of gold. If the price can find support in this area and rebound, it could potentially break through the previous high of $2,943 and move on to challenge the psychological barrier of $3,000. If the price fails to stabilize near this support level, the next support zones to watch will be $2,860 and $2,838.
In the coming months, the price of gold will likely be influenced by multiple factors, including changes in U.S. inflation data, the Federal Reserve’s monetary policy, global geopolitical risks, and changes in central bank gold reserves. Particularly in an environment where market risk appetite and safe-haven sentiment alternate, the potential for gold price volatility remains significant.
The value of gold as a safe-haven asset cannot be easily replaced, especially amid growing global economic uncertainty. This provides a certain buffer against downward price movements and means the price could surge again at any time due to unforeseen events. Whether facing a short-term correction or a long-term rally, investors should pay close attention to market dynamics and adjust their investment strategies flexibly.
Overall, the trend of gold prices is influenced by a multitude of factors, with both fundamentals and technicals indicating potential for increased volatility. Although stronger-than-expected U.S. inflation data and a rising U.S. Dollar Index are putting pressure on gold, factors such as safe-haven demand, central bank purchases, and global geopolitical risks continue to provide strong support. For investors, the current dynamics of the gold market are filled with both challenges and opportunities. While a strong dollar may weigh on the price, the support from safe-haven demand and central bank buying suggests that a pullback could be paving the way for a future rebound. Therefore, keeping a close eye on gold’s key support and resistance levels will be crucial for capturing short-term trading opportunities.
*The content of this article is for sharing and reference purposes only and does not constitute professional investment advice. As individual circumstances and needs vary, you may contact the Cashback Island team or consult your financial planner for professional advice.
When U.S. inflation is higher than expected (e.g., the 3.0% CPI in January 2024), the market anticipates that the Federal Reserve may delay interest rate cuts or even raise rates, leading to a stronger U.S. dollar. Since gold is priced in dollars, a stronger dollar makes gold more expensive for holders of other currencies, which can suppress the price in the short term. However, in the long run, high inflation also increases gold’s appeal as an anti-inflation asset.
A support level is a price range where a downtrend is expected to pause or reverse. Key levels to watch currently are:
Strong support: $2,875 (if this level holds, a rebound towards $3,000 is possible)
Secondary support: $2,860-$2,838 (if breached, the short-term trend may weaken)
Investors can monitor these price levels along with market news to adjust their strategies.
