On Wednesday, spot gold continued its European gains driven by lower-than-expected December U.S. core CPI, approaching the $2,700 mark but failing to break through. As of now, the price of gold is 2,695.87.
The year-on-year growth rate of the overall U.S. CPI rebounded modestly to 2.9%, and the year-on-year growth rate of the core CPI unexpectedly fell from 3.3% last month to 3.2%. After the data was released, traders increased their bets on the Fed's June rate cut, and the possibility of two rate cuts this year increased.
"New Fed News Agency": The U.S. CPI data for December is unclear, and the Fed is expected to remain on hold this month.
Beige Book of the Federal Reserve: Manufacturers are hoarding inventory in anticipation of tariff increases.
Speech by Federal Reserve officials:
New York Fed President Williams: The decline in inflation has shown a broad basis.
Chicago Fed President Goolsbee pointed out that inflation is making progress and delinquency rates for cars and credit cards are rising.
Richmond Fed President Barkin: Inflation is falling back toward the 2% target, and restrictive policies should be maintained to control inflation.
The ceasefire agreement in the Gaza Strip will take effect on the 19th of this month. The agreement will be implemented in stages, including ceasefire, exchange of detained personnel, and gradual withdrawal of Israeli troops from the Gaza Strip. Israel said that the details of the ceasefire agreement are yet to be finalized; Biden said Israel will conduct the next phase of negotiations in the next six weeks.
The German economy has shrunk for the second consecutive year.
The gold market was in chaos early Wednesday morning because we continue to see a lot of noise. I do think that gold will continue to fluctuate in a range. In fact, I think that although the CPI data increased by 0.2% month-on-month instead of the expected 0.3%, we may be facing a situation where the gold market may not have seen enough data to make a decision. I think we need to go sideways for a while, but when you look at the market performance in 2024, this makes sense.
Gold started at around $2,070 in 2024 and went up to $2,790, which is a pretty strong year. So it makes sense to eliminate some excess market bubbles. I still think gold is more suitable for buying on dips, so I am a little hesitant to short. The 50-day EMA may be a support level, and if the price continues to fall, the $2,600 level is definitely a strong support. On the other hand, if gold breaks through $2,720, it will be a breakout signal. However, before the price breaks through this level, I think gold is relatively neutral, but has a potential upward trend.
On Wednesday, spot gold hit a high of $2,695.96, driven by risk appetite. Optimism is a combination of US earnings season and CPI data. On the one hand, the earnings reports of major US banks exceeded expectations. Goldman Sachs doubled its profits in the fourth quarter, while JPMorgan Chase announced growth in large assets and wealth management during the same period. On the other hand, the US December core CPI annual rate was lower than expected, which pushed investors to increase bets on the Fed's interest rate cut, leading to higher US stocks and lower US Treasury yields.
Technically, spot gold maintains a bullish tone at the daily level as prices continue to run above all cycle moving averages. Although the 20-day SMA and 100-day SMA converge near $2,635 without directional guidance, they still act as dynamic support. At the same time, technical indicators point upward, reflecting that bulls are still in the lead.
In the short term, gold is neutral to positive on the 4-hour level. The price quickly recovered after falling to the flat 20-period SMA and is currently providing dynamic support near $2,677. The longer-term moving average is rising modestly below the shorter-term moving average. At the same time, technical indicators lack directionality, with the momentum indicator stuck at the 100 level and the RSI indicator retreating around 60.
Support: 2675, 2660.7, 2645.15
Resistance: 2697.9, 2725, 2738.15
Gold prices are recovering to around $2,700 as monetary strategies continue to shift, while industrial demand for silver is surging due to its use in green technology and efficient electronics.
As far as gold price movements are concerned, Western buying has not yet participated. This bull run started in the East - the Middle East, Southeast Asia and Eastern Europe - driven by unprecedented central bank buying. Western investors have not yet fully realized what is happening here. China's massive gold purchases highlight this shift. China resumed gold purchases last year after a six-month pause as part of a broader strategy to reduce its reliance on the US dollar. Additionally, we are seeing an unusual market phenomenon: gold remains strong while the dollar strengthens. This suggests that the world is losing confidence in fiat currencies. Central banks want assets that are not subject to political manipulation, and gold is the ultimate store of value.
As for silver, I believe that silver production has peaked, with the last time we saw a significant increase in production being in 2017 or 2018. At the same time, demand has surged, with more than two-thirds of silver now used in high-efficiency electronics, renewable energy technologies, and even medical applications, painting a picture of strong demand but short supply. Despite its importance, silver has struggled to keep up with gold in recent years, in part because retail investors have sought higher returns in cryptocurrencies. But I believe that when silver catches up, it will outperform gold. Russia has expressed its intention to include silver in its central bank reserves, further increasing its appeal. If silver starts to be seen as a store of value like gold, the upside potential is huge. The historically high gold-silver ratio suggests that silver is still undervalued.
The gold market continues to see a lot of noise, and I think it is still a place with a lot of range fluctuations. The gold market has not yet had enough momentum to make a decision based on the CPI data. I think gold will continue to consolidate for a while. Last year's gains have been quite amazing, and it is reasonable to continue to remove some bubbles. Therefore, I am a little hesitant to short.
If gold prices fall lower, the 50-period exponential average may be support, and the 2600 mark is definitely support. If it breaks above 2720, it will be a signal for a breakthrough. However, until we get to this level, I think gold is quite neutral with a potential positive bias.