Gold Treads Water Close to Monday’s 8-Month Highs
XAU/USD Analysis
After two very bad quarters, Gold posted a strong recovery in November and December, ending 2022 pretty much at the same level it begun. The new year has started on the offensive, which led to Monday's eight month highs.
This is largely driven by renewed market hopes for a Fed pivot, which works against the USDollar, following Friday's economic releases from the US. Jobs creation growth decelerated again in December and wages eased to +4.6% y/y and the smallest rise of 2022, while the services sector contracted for the first time since 2020.
CME's FedWatch Tool prices-in a miniscule 0.25% rate hike in the next meeting, assigns the highest probability to rates peaking at 5% and points to cuts towards the end of the year [1]. Fed officials are far more hawkish though, since they recently upgraded their views on the appropriate policy path.
They expect a higher median terminal rate of 5.1% [2] and last week's minutes highlighted that "no participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023". [3]
As such, market participants will be eagerly looking for more hints around the Fed's intentions, with Chair Powell expected to speak later today, although we don't know if he will touch on the subject. Furthermore, US CPI inflation update is due on Thursday, which can determine the trajectory of the precious metal.
On the technical front, XAU/USD recently formed a Golden Cross on the daily chart (EMA50>EMA200) and Monday's eight-month highs have brought 1,909 in its crosshair. Bulls will likely need fresh impetus for taking out, whereas 1,959-62 may prove elusive in the near-term.
On the other hand, XAU/USD loses steam today as the greenback reacts and this could lead to a breach of the 50% Fibonacci of the 2022 high/low drop (1,842). However, daily closes below the critical 1,800-1,788 region are required to negate the bullish bias, which looks like a toll order at this stage.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 10 Jan 2023 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html | |
| Retrieved 10 Jan 2023 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20211215.htm | |
| Retrieved 18 Apr 2026 https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20221214.pdf |
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