Gold confirms uptrend as market bets that hiking cycle is done

Further to our previous note, gold has charted a higher trough followed by a higher peak on the significant weekly timeframe. This puts the precious metal into a defined uptrend on its weekly chart. XAUUSD is trading around $2,040, which is near six-month highs.

This, as FXCM's USDOLLAR basket weakened on thinking that the Federal Reserve has finished hiking rates. The market is pricing in more than a 90% probability that the Fed holds rates steady at its next two meetings. Furthermore, the CME FedWatch Tool puts the chances of a 25bps cut in March around 42%. This is significant because participants often identify a depreciating dollar and decreased interest rates as factors that can elevate gold prices.

Goldman Sachs write in their Sunday note that, "the potential upside in gold prices will be closely tied to U.S. real rates and dollar moves, but we also expect persistent strong consumer demand from China and India, alongside central bank buying to offset downward pressures from upside growth surprises and rate cut repricing."

Bank of America writes that gold is likely to appreciate from Q2 2024 as "real rates are pushed lower by the Fed cutting."