Gold and Bitcoin prices tumbled on Tuesday as the dollar rose, as investors await FOMC minutes and US economic data to unravel the Fed’s rate hike strategy.
“There are more clues to be found in the FOMC minutes”
cryptocoin.com As you follow, this week the focus of crypto investors such as gold and Bitcoin has shifted to the publication of the minutes of the Federal Open Market Committee (FOMC) January meeting on Wednesday. Then there will be US Gross Domestic Product data on Thursday and the core PCE price index on Friday. Han Tan, chief market analyst at Exinity, comments:
Gold’s primary driver remains changing expectations surrounding the Fed’s next policy moves, and perhaps there are more clues to be found in the upcoming FOMC minutes. If the U.S. economy continues to defy the Fed’s rate hikes so far, it could invite a higher peak for U.S. interest rates, upsetting bullion bulls.
“More downside possible for gold prices”
Gold prices hit $1,959.6 earlier this month, their highest level since April 2022. But it has since lost about $130 after US data showed signs of a resilient economy. Bitcoin, on the other hand, made a bull run in the last days and managed to rise above 25 thousand dollars. However, it failed to maintain this limit and declined to $24,500. Ricardo Evangelista, senior analyst at ActivTrades, highlights the following in a note:
The dollar is likely to continue to strengthen as investors price the central bank’s renewed falconry. This means that there may be more downside movements for gold prices.
“The fall in gold prices was somewhat balanced”
Gold prices hit their highest since April 2022 earlier this month, but have since dropped nearly 6% after US data showed signs of a resilient economy and a tight labor market, raising concerns that rates could stay higher for longer. .
The decline in gold prices has somewhat stabilized as markets assess whether the Fed’s hawk repricing is going a little too fast, according to OCBC FX strategist Christopher Wong. Citing personal consumption expenditures (PCE), the Fed’s preferred measure of inflation, Wong comments:
The repricing of further hawking by the Fed will need to find a new catalyst. This will also focus on basic PCE. An upside pressure could add to the USD momentum and put pressure on gold. But a bearish surprise to the data could see a pause in hawkish Fed pricing and gold rally.
“Gold is strong, but…”
Colin Cieszynski, chief market strategist at SIA Wealth Management, said: “There is a growing perception this week that the Fed may need to stay hawkish. Therefore, the Fed ‘may need to continue raising interest rates for longer than previously thought,’ he says.
According to Adrian Ash, BullionVault research director, the rebound in US economic data and continued strong inflation have destroyed hopes for a ‘Fed pivot’. This was directly reflected in the falling gold price. Ash also comments:
Looking ahead, precious metals will likely remain a trader’s market until economic data or the geopolitical picture changes. Gold appears to be constrained by strong, but slower falling inflation and soft but continued growth.
“Demand increased in China and India after the decline in gold”
Gold price is declining towards the $1,830 mark. In the view of economists at Commerzbank, the release of the minutes of the February 1 FOMC meeting tomorrow is unlikely to provide new trade momentum. Economists explain their views on this issue as follows:
Market participants will focus on the Fed’s early February meeting minutes to be released tomorrow. However, the minutes are likely to be of limited importance as they precede the US labor market and inflation data that led to a reassessment of interest rate expectations in the market.
According to economists, the price drop seems to have boosted demand for gold in India and China over the past week. In this context, they state that after the gold imports were postponed in anticipation of a possible reduction in the import duty, the increased demand met with the decreasing supply, but that did not happen then. In addition, they comment:
The jewelers there replenish their stocks after New Year’s. This shows once again how price sensitive gold buyers in India and China are. While that doesn’t mean they can increase prices significantly, they can prevent or at least slow down further price declines.
