Gold futures gained over $25 this week, even with hawkish Fed speak

Even with multiple Federal Reserve officials reconfirming the Fed’s resolve to not raise rates too quickly, gold managed to have a solid gain on the day and week. As of 5:30 PM ET gold futures basis, the most active April contract gained $25.30 on the week, with the majority of the gains occurring today after factoring in a net gain of $18.70, or 0.92% taking gold futures to $2049.40. 

On Thursday Governor Christopher Waller said that he was in “no rush” to cut rates. He also said that “January’s figures may have been driven by one-time quirks — many companies raise prices at the start of the year — or they may suggest “inflation is stickier than we thought, we just don’t know yet.” 

Fed official, Patrick Harker, president of the Federal Reserve Bank of Philadelphia, also expressed caution about cutting rates too soon. 

 Fed Vice Chair Philip Jefferson warned against cutting rates too deeply in response to the positive economic news.

 According to the Associated Press, “Several Federal Reserve policymakers warned Thursday against cutting U.S. interest rates too soon or by too much in the wake of recent data showing inflation stayed unexpectedly high in January.”

Dollar weakness did provide mild tailwinds with the dollar index declining by 0.31% this week. However, compared to gold’s weekly gain of 1.25%, dollar weakness only accounted for approximately a fifth of gold’s weekly gains.

On a technical basis, gold had a solid breakout this week, revealing that the price reversal that occurred on February 14 when gold traded to a low of $1996 signaled growing bullish market sentiment by market participants. Today’s incredibly strong finish is evident by looking at the low occurring at the 100-day simple moving average, and the daily high breaching the 50-day moving average. 

If follow-through buying occurs at the beginning of next week and breaks above the 50-day moving average on a closing basis we could easily see gold challenge $2070 the next level of technical resistance. A break above $2070 would put gold in the position to challenge major resistance which occurs at $2100 per ounce.

Considering that interest rates are still relatively high with the Federal Reserve in no hurry to raise rates, strong risk-on market sentiment continues, the fact that market participants continue to accumulate gold as a safe-haven asset reveals that investors are overwhelmingly concerned about any escalation of tensions in the Middle East.

Wishing you as always good trading,