Gold trading reminder: strong data helped the dollar climb, gold prices rose and fell, and the market focus turned to future trends

Friday (March 22), the beginning of the Asian market,Spot goldNarrow quake, currently trading in 2181.10dollarGold prices rose and fell on Thursday.Federal ReserveAfter Chairperson Powell hinted on Wednesday at three rate cuts in 2024, gold gained additional momentum, briefly setting an all-time high of $2222.65 an ounce. But withDollar indexAfter a rebound, gold prices gave up their gains becauseUnited StatesInitial jobless claims unexpectedly fell last week, while existing home sales rose at their fastest pace in a year in February, signs that the economy remains robust in Quarter 1.

Spot gold closed at $2181.13 an ounce on Thursday, down about 0.23%.

(Daily chart of spot gold)

TD SecuritiescommodityDaniel Ghali, strategist, said: "Overnight aggressive buying appears to have lost momentum and gold prices are correcting as interest rate markets have priced in only a small increase in the likelihood of more rate cuts in 2024."

Traders currently expect a 72% probability that the Federal Reserve will start cutting interest rates in June, up from 65% before the rate decision. 

According to CME "Fed Watch", the probability that the Fed will keep interest rates unchanged in May is 93.1%, and the probability of a cumulative 25 basis point cut is 6.9%. The probability that the Fed will keep interest rates unchanged in June is 28.3%, the probability of a cumulative 25 basis point cut is 66.9%, and the probability of a cumulative 50 basis point cut is 4.8%.

Initial jobless claims fell by 2,000 to a seasonally adjusted 210,000 in the week ending March 16, the Labor Department said. Economists interviewed had forecast 215,000 in the latest week.

The number of unadjusted applications fell by 12,730 last week to 189,992. Federal Reserve Chairperson Jerome Powell told reporters on Wednesday that he did not see "cracks" in the labor market, which he viewed as "in good shape," noting that "most of the extreme imbalances we saw in the early days of the epidemic recovery have been addressed." Since March 2022, the Fed has raised its benchmark interest rate by 525 basis points to its current range of 5.25% -5.50%.

Next week's renewal data will provide more clues about the health of the labor market in March. Thursday's report showed the number of so-called renewals rose by 4,000 to 1.807 million in the week ending March 9.

In a separate report on Thursday, the National Association of Realtors (NAR) said existing home sales jumped 9.5% last month to a seasonally adjusted annual rate of 4.38 million, the highest since February 2023. Monthly sales growth was also the largest since February 2023.

Supported by strong economic data, the dollar index rose 0.58% on Thursday, recovering all of Wednesday's losses to close at 104.02, the highest closing price in March. The Swiss National Bank's unexpected interest rate cut and the Bank of England's dovish signal also provided upward momentum to the dollar index on Thursday.

Karl Schamotta, chief market strategist at Corpay in Toronto, said the Swiss National Bank's rate cut suggested that inflation was under control and that other central banks would soon ease monetary policy, boosting the dollar. "The US remains the only option in global markets that offers higher yields - both nominal and real - than other major economic areas". "Given optimism about the outlook for the US economy, the flow of money to the US remains largely unstoppable at the moment".

However, data showed that holdings of SPDR Gold Shares, the world's largest physically backed gold exchange-traded fund, rose for a fourth straight day on Thursday, the longest streak of gains since March 2022, in one sign that many professional institutions and mid- to long-term investors have turned back to the long side.

Marcus Garvey, head of commodity strategy at Macquarie Group Ltd., said a move toward $2,300 was a "reasonable technical target."

"I think the fact that the Fed did not take advantage of the recent strengthening in inflation to lean hawkishly at its latest meeting means that gold is now entering a short-term overshoot," he said.