Gold Price Forecast: Yellow Metal Upsurge Targets New Weekly Highs

Summary:
• Gold prices are on track to register new weekly highs, but the US Initial Jobless Claims data could disrupt the momentum.

Gold prices have recovered the losses incurred on Wednesday in mid-morning London session, as markets react to mixed signals from the January FOMC minutes. Gold traded at 2040, a +0.30% gain at the COMEX futures market, while spot gold exchanged hands at $2,030 an ounce, a gain of +0.20% as of this writing.

The dollar’s is currently under downward pressure from underperforming US Treasury yields. Yields on the 10-year bonds have fallen by 1 basis point, while the 5 year bonds are on the same trajectory. Also, the market has already locked in a higher-for-longer Fed interest rate, and the January FOMC minutes failed to provide impetus to the dollar.

Some FOMC members’ statements during the January meeting show that interest rates may have peaked. Furthermore, the Fed had been more optimistic than some of the market analysts, and the subsequent “underwhelming” output by the US economy is being interpreted as bearish-leaning. For gold prices, the expected benefits from struggling Chinese stock markets may not be forthcoming, after all. China’s benchmark CSI 300 Index registered its eighth straight session of gains on Thursday, ending the day at +0.9%. This has dashed anticipation of inflows to gold from investors seeking safe haven assets, following prolonged decline in China’s equity markets.

Gold prices outlook heading into the weekend will depend on the US Initial Jobless Claims data that will come out later on Thursday. A decline in the figures will be bullish for the dollar, as it could ease of the current pressure emanating from FOMC minutes.

Technical analysis

The RSI indicator on the spot gold market shows bullishness and favours further upward action. The 2024.00 pivot is critical in intraday trading, and a move beyond the 2035.00 resistance could build propulsion to test the next resistance at 2039.00. However, watch out for action below 2024.00, as such a breach would likely test the 2020.00 support. Further losses beyond that point will invalidate the bullish view and potentially push gold to test 2015.00.