Gold prices fluctuate after the first Fed meeting of 2024

Gold Price Today Fluctuates Following Policy Signals

As of February 1, 2024, the gold price stands at $2,047.21 (Gold Spot) and $2,064.4 (Gold Futures) after the Fed meeting concluded last night. The gold market experienced noticeable volatility due to the U.S. Federal Reserve’s decision to keep interest rates unchanged.

Fed Meeting Confirms Wait-and-See Approach

In the recently concluded FOMC meeting, the committee decided to keep interest rates in the range of 5.25% - 5.50%, with no changes. This marks the fourth consecutive meeting with rates held steady. Chairman Jerome Powell explicitly stated that a rate cut in March is unlikely, as the central bank wants to see more evidence of sustained inflation moderation.

Powell stated, “We want to see more compelling data,” reflecting the Fed’s cautious stance before beginning to cut rates. Market expectations indicate about a 64% chance that the Fed will maintain its current stance at the March 19-20 meeting.

Significant Changes in Policy Statement Language

A notable change in the policy statement was the removal of language indicating a willingness to raise rates further. While initially seen as a positive signal, markets did not interpret this as an imminent rate cut. The statement now says the committee will not consider rate reductions “until there is greater confidence” that inflation is moving sustainably toward the 2% target.

Another important implication is the reduction in references to “lagging factors” of monetary policy. The Fed has raised interest rates 11 times from March 2022 to July 2023, and generally, it takes 12-18 months for policy changes to impact the economy.

Inflation Eases but Still Below Target

Recent economic data show some positive signs. The core PCE inflation rate was 2.9% in December, the lowest since March 2021. Over the six- and three-month periods, core PCE has remained below the Fed’s target.

On the labor market front, ADP reported that private companies added only 107,000 jobs in January, below expectations. The (Employment Cost Index) increased by just 0.9% in Q4, the lowest quarterly increase since Q2 2021.

This supports a “soft landing” scenario where the Fed can control inflation without damaging employment and economic growth.

Gold Market Reaction: Stronger Than Expected

Gold has performed better than expected despite policy statements supporting the dollar’s positive momentum. Data shows prices have risen as markets reassess the risk of continued rate hikes.

Forex strategists at Forexlive.com note that the statement shows slight bias against a March rate cut. Capital Economics’ economists suggest that, although the outlook is positive, a rate cut in March remains unlikely. If the Fed truly wants to shift market expectations, Jerome Powell may need to use more explicit language.

Technical Analysis of Gold Prices

From a technical trading perspective, gold prices are experiencing significant oscillations after a prolonged downtrend, but in the past three days, prices have been rising consecutively.

On the daily chart, the EMA 12 and 26 moving averages have crossed, indicating a potential trend reversal. This week will be crucial in confirming whether prices can re-enter a short-term bullish trend.

Support Levels:

• Level 1: $2,041 - $2,039
• Level 2: $2,034 - $2,030
• Level 3 (Previous trend line): $2,027

Resistance Levels:

• Level 1: $2,049 - $2,056 (Last month’s high)

On the 4-hour chart, support and resistance levels remain the same, reflecting the importance of these price points. The market may still experience significant fluctuations following initial policy adjustments by the Fed.

Summary Outlook

The U.S. Federal Reserve reaffirms its stance of waiting for more data before considering rate cuts. Signals from committee members in December indicated that rate reductions might total only 0.75% in 2024, below market expectations. Gold continues to show resilience and may be supported by a lower-risk environment with fewer rate hikes ahead.