With the US January Consumer Price Index (CPI) exceeding expectations, market expectations for the Federal Reserve’s future monetary policy have shifted, causing the US Dollar Index to rise rapidly and leading to a certain pullback in gold prices. However, despite the pressure, the gold market still shows upward potential, mainly supported by safe-haven demand, central bank gold purchases, and geopolitical risks. Against this backdrop, analyzing gold trends has become particularly important for investors. Especially by observing key support and resistance levels, future gold price fluctuations may present new trading opportunities.
The US CPI data for January showed that inflationary pressure in the US remains significant, with the index rising 3.0% year-on-year, higher than December’s 2.9% and exceeding the market expectation of 2.9%. Core CPI, excluding food and energy, rose 3.3% year-on-year, also surpassing the market expectation of 3.1%. These figures indicate that US inflation has not been effectively controlled, further intensifying the impact on the Federal Reserve’s policy outlook. Fed Chair Jerome Powell emphasized that while the US economy remains resilient, inflation has not yet reached a level that allows for a rapid policy relaxation. This further fueled market expectations of rate hikes, causing the US dollar to strengthen in the short term, which pressured gold prices.
However, despite the pullback in the gold market, in the context of current global political and economic conditions, demand for gold as a safe-haven asset remains strong. In particular, geopolitical risks in the Middle East and the continued demand for gold from major central banks are providing support for gold prices.
Although market expectations for rate hikes have risen, gold prices still show certain upward momentum. Global geopolitical events, especially uncertainties in the Middle East, continue to drive strong demand for safe-haven assets. In addition, major central banks continue to increase their gold reserves, which not only helps diversify risks but also provides a reliable bottom support for gold prices.
For example, the recent rise in India’s gold leasing rates indicates that global gold demand remains strong. 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 trend. Although short-term expectations of Federal Reserve rate hikes are suppressing gold prices, from a long-term technical pattern and the comparison of bullish and bearish forces, gold remains in a relatively strong range. If gold prices can stabilize near key support levels, it may still have the potential to challenge previous highs in the future.
At present, 2875 USD is considered a key support level for gold prices. If gold finds support and rebounds in this area, it may break the previous high of 2943 USD and further challenge the psychological barrier of 3000 USD. If gold fails to hold near this support, 2860 USD and 2838 USD will become the next support range to watch.
In the coming months, gold prices may be influenced by multiple factors, including changes in US inflation data, Federal Reserve monetary policy, global geopolitical risks, and changes in central banks’ gold reserves. Particularly in an environment where market risk appetite and safe-haven sentiment alternate, gold prices still have considerable potential for volatility.
As a safe-haven asset, gold’s value cannot be easily replaced amid increasing global economic uncertainty. This provides gold with some downside buffer space and the possibility of moving upward again due to unexpected events. Whether in short-term pullbacks or long-term upward trends, investors should pay close attention to market dynamics and adjust investment strategies flexibly.
Overall, the movement of gold prices remains influenced by multiple factors, with both fundamentals and technicals indicating potential for increased volatility. Although stronger-than-expected US inflation data and a rising dollar index are putting pressure on gold prices, safe-haven demand, central bank gold purchases, and global geopolitical risks continue to provide strong support. For investors, the current dynamics in the gold market present both challenges and opportunities. While a strong dollar may exert pressure on gold, the support from safe-haven demand and central bank buying suggests that the current pullback could merely pave the way for a future rebound. Therefore, paying close attention to 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 US inflation exceeds expectations (such as January 2024 CPI reaching 3.0%), the market anticipates that the Federal Reserve may delay rate cuts or even raise rates, causing the dollar to appreciate. Since gold is priced in dollars, a stronger dollar makes gold more expensive for holders of other currencies, putting short-term pressure on gold prices. However, in the long run, high inflation increases gold’s appeal as an inflation-hedging asset.
A support level refers to a price range where gold prices may stabilize after a decline. Current key levels to watch are:
Strong support: 2,875 USD (holding this level may lead to a rebound challenging 3,000 USD)
Secondary support: 2,860-2,838 USD (a break below this level would weaken the short-term trend)
Investors can monitor these price levels along with market news to adjust their strategies accordingly.
