Gold up 5th week in row, with $1,950 test in view

By Barani Krishnan

Investing.com -- Gold prices maintained their luster for a fifth week in a row as bullish investors pushed toward a test of the $1,950 an ounce level on Friday — a breach analysts said would be crucial to sustaining the precious metal’s rally, which has been predicated on forecasts for smaller U.S. rate hikes.

“Gold’s facing some strong resistance ahead of the $1,950 level and that might hold until we get to the FOMC decision at the start of next month,” Ed Moya, analyst at online trading platform OANDA, said, referring to the Feb. 1 rate decision of the Federal Reserve’s policy-making Federal Open Market Committee.

“If bullish momentum remains in place, the $2,000 level will remain massive resistance,” Moya said.

Gold for February delivery on New York’s Comex settled at $1,928.20 an ounce, up $4.30, or 0.2%, after hitting a nine-month high at $1,938.85.

Investing.com data shows that if February gold were to get past $1,950, its next major target would be the April 18 target of $2,003.

Aside from its advance on Friday, the benchmark U.S. gold futures contract rose 0.3% for the week, adding to its 6.7% gain over four prior weeks.

The spot price of gold, more closely followed than futures by some traders, was at $1,927.95 by 15:38 ET (20:38 GMT) — down $4.29, or 0.2%, on the day. Spot gold peaked at $1,937.54 on Friday — its highest since the $1,955.93 attained on April 25. Spot gold’s bigger target would be the March 10 target of $2,009.57.

Gold’s upward trajectory came as the dollar and U.S. bond yields continued their tumble this week despite a rebound on Friday.

The dollar and bond yields are tumbling in anticipation the Fed will execute its smallest rate hike in eight months at the Feb.1 conclusion of its next policy meeting, versus a stream of aggressive increases it pulled off in 2022.

Officially, inflation, as indicated by the Consumer Price Index, or CPI, rose by 6.5% in the 12 months to December. It was the slowest annual advance for the CPI since October 2021.

The CPI hit a 40-year high in June when it grew at an annual rate of 9.1%, versus the Fed's inflation target of just 2% per annum. In a bid to control surging prices, the Fed added 425 basis points to interest rates since March via seven rate hikes. Prior to that, interest rates peaked at just 25 basis points, as the central bank slashed them to nearly zero after the global COVID-19 outbreak in 2020. The Fed, which executed four back-to-back jumbo rate hikes of 75 basis points from June through November, imposed a more modest 50-basis point increase in December.

For its next rate decision on Feb. 1, economists expect the central bank to announce an even smaller hike of 25 basis points.

The last time the Fed announced a 25 basis-point increase was in March 2022, at the start of its current rate hike cycle.