Gold (XAU/USD) Eyes January High: Can It Reach $2,079?

• Gold on the Rise: A Look at the Current Financial Landscape
• The Influence of Federal Policy on Gold
• Gold as a Safe Haven
• Technical Indicators Suggest Growth

Gold on the Rise: A Look at the Current Financial Landscape

The price of gold has continued its ascension this week, reaching unprecedented highs beyond $2060 and currently trading at $2,053. Following a somewhat stagnant January, the precious metal saw a resurgence in demand as bond markets experienced a significant rally. The yield on US 10-year and 2-year Treasury notes experienced a steep drop from their recent peaks, which had a weakening effect on the US dollar and subsequently increased the appeal of gold as a hedge against inflation.

The Influence of Federal Policy on Gold

The renewed interest in gold can be linked to the recent policy meeting held by the Federal Reserve. The meeting suggested a shift toward smaller rate hikes, a change that could be sustained if the economy remains stable. The expectation among economists is that the US added approximately 180,000 jobs last month, while the unemployment rate saw a minor increase to 3.8%. This may indicate a potential easing in the Federal Reserve's tightening measures if these predictions come to fruition.

Gold as a Safe Haven

Investors have been grappling with the fear of a sudden recession on one hand and persistent inflation on the other for over a year. While the US manufacturing sector continues to contract slightly according to data from the Institute for Supply Management, the rate of this contraction eased in January, offering a glimmer of hope. If the jobs data released on Friday confirms this trend of tempered growth as opposed to soaring wage gains, it could pave the way for gold to potentially reach $2100.

Technical Indicators Suggest Growth

In the short-term, technical indicators suggest potential for further growth in light of gold's decisive break above its 20-day simple moving average and the bullish crossover between various medium-term averages. Key support now lies around $2040, with bullish momentum accelerating across daily and 4-hour timeframes. Consequently, the path of least resistance seems to point upward, unless there are unexpected surprises from upcoming events such as Friday's job and wage growth reports.

Edited by Jonathan Stoker