Signs of cooling price pressures will reduce rate hike expectations for 2023, providing support for gold prices.
A weaker USD is not the only incentive for bulls; fears of global recession also increase the yellow metal's safe-haven demands. Economic data in most developed economies are getting weaker, which has various consequences. A weaker economy means we can face a recession, even if it would be soft, but still, it is a recession and can raise fears, so gold demand increases. On the other hand, weaker economic data will encourage the central banks to slow down the tightening measures, which can increase the pressure, especially on the US dollar. In the XAUUSD pair, market moves will favor the yellow metal.
In short, in any case, gold is the primary winner in the current condition. Especially remembering that inflation is still high, and if central banks do not raise the rate anymore or even start cutting the interest rates, it means inflation can stay longer, which helps the recession last longer, so gold bulls can keep the market control for a longer time. So, as long as inflation rates remain high and we have signs of cooling price pressures, rate hike expectations for 2023 will reduce, providing support for gold prices.
Therefore, the gold's bullish trend, which has been there for the last couple of months, is likely to continue if the Fed signals a pause in raising interest rates within the first quarter of 2023.
From a technical point of view, the trend remains bullish, especially by stable trading above $1,800, as its key and psychological pivot. While bulls have complete market control in the bigger timeframes, in the smaller time frames, $1,864 and $1,850 are the first and second supports and could be touched again before rising higher. Above these levels, $1,893 and $1,908 are the following targets.
