The gold market remains actively bullish due to confidence in interest rate cuts by the Federal Reserve this year, as well as sustained demand from central banks.
Investors were reassured by Fed Chairman Jerome Powell's comments on Wednesday that it would probably be appropriate to start reducing borrowing costs at some point this year. Lower rates are generally positive for precious metals.
Fed Chairman Powell reiterated that the central bank will take a wait-and-see approach before cutting borrowing costs. At the same time, his opinion that the recent inflation figures did not significantly change the overall picture supported risk assets.
Traders have tempered their expectations for a rate cut in recent days due to signs of economic resilience and Fed officials' cautious tone. That has raised skepticism about whether Powell and his colleagues can meet the central bank's forecast of three rate cuts this year.
According to a report by the Global Investment Committee at Morgan Stanley, despite the robust outlook for a soft landing for the US economy, investor expectations for the stock market's growth prospects appeared to be too high.
The latest data compiled by the World Gold Council showed that central banks continued to increase their gold reserves in February. China was the dominant buyer, while India and Kazakhstan were also highly active in gold purchases.
Investors will be keeping a close eye on Friday's Non-Farm Payrolls data for more clues about the state of the US economy and the likely direction of monetary policy. It should be kept in mind that the Bloomberg survey suggests significant employment growth.
On the technical side, gold prices are in a strong overbought zone, which indicates that there is a high probability of an early correction, despite the continued bullish trend. Prices have formed a divergence with the RSI indicator on the daily timeframe.
The correction target is the level of 2230.0.
The overall recommendation is to sell gold. Profits should be taken at the level of 2230.0.
A Stop-loss could be set at the level of 2350.0.
This content is for informational purposes only and is not intended to be investing advice.
