Gold Keeps Underperforming Equities, but For How Long? Key Levels to Watch

investing.com:

Gold finished lower last week, and remains in the red for the month of January and therefore the year as well. The metal had risen in the last three months of 2023, boosted by speculation that the Fed is going to start cutting interest rates sooner than it had projected in its previous dot plots.

This year, we have seen a bit of hawkish repricing of the Fed’s rate cuts, and correspondingly gold has fallen as yields have bounced. A few weeks ago, a rate cut for March was almost a forgone conclusion by the market. Now, it is a coin-flip, according to Investing.com's Fed Monitor tool.

The hawkish repricing of the Fed rate cuts has been supported by stronger data and hawkish commentary from Fed officials. Yet, this hasn’t stopped equity markets from reaching fresh record highs, thanks to the high-flying technology shares.

In fact, the US dollar’s recovery has been modest and gold has given back only little. So, there is still a good chance we may see the resumption of the bullish trend for gold once the hawkish repricing of the Fed cuts is complete.

However, I won’t be pre-empting and instead wait for the right bullish signal from the charts before looking for long setups, in light of the growing chorus of central bank officials pushing back on rate cuts.

Gold’s near-term direction is subject to heightened volatility this week as we have a couple of central bank meetings, namely the Bank of Japan and European Central Bank, and some top tier data from the US.

Tuesday, January 23

The BoJ is not likely to alter its policy at this meeting, but may do so at some point in this first half of the year. Recent data releases from Japan will give them very little incentive to make any changes to current settings, with inflation and