Market Focus: Gold (XAU/USD) Lacks Momentum, Bitcoin Hits Highs

Gold (XAU/USD) awaits US CPI release while Bitcoin (BTC/USD) tests multi-year highs. Stay updated on market trends and potential impacts.

The gold market is currently lacking direction, eagerly anticipating the release of the latest US Consumer Price Index (CPI) data. On the other hand, Bitcoin continues to showcase strength, probing its highest levels in years. This article delves into the factors influencing gold and Bitcoin, highlighting their recent performance and prospects.

Gold Analysis and Outlook

As the week begins, markets are relatively quiet due to Asian holidays, including the week-long closure of Chinese markets for the Lunar New Year. Despite a lack of substantial economic data, traders should keep an eye on speeches from central bankers.

The US Bureau of Labor Statistics will announce the January inflation figures tomorrow at 13:30 UK time. Year-on-year (YoY) projections suggest core inflation will drop to 3.8% from the previous 3.9%, while headline inflation will decrease to 3% from the prior month’s level of 3.4%.

Although the Federal Reserve would view a decline in US price pressure positively, it is unlikely to impact the possibility of a March rate cut significantly. Current market expectations indicate only a 17.5% chance of a 25 basis point rate cut in March.

When we examine the daily gold chart, we observe a lack of volatility in the precious metal. Gold is confined within a narrow trading range, as indicated by the 14-day Average True Range (ATR) standing just above $20. Resistance remains at the $2,044/oz level, while support is at $2,010/oz, followed by $2,000/oz. Traders hope the US inflation data released tomorrow will inject much-needed volatility into the gold market.

According to retail trader data, 66.31% of traders are net-long, with a long-to-short ratio of 1.97 to 1. The number of net-long traders is higher by 4.41% compared to yesterday and 7.80% higher compared to last week. On the other hand, the number of net-short traders is 8.05% higher than yesterday and 2.21% lower than last week.

Market Focus: Gold (XAU/USD) Lacks Momentum, Bitcoin Hits Highs

Bitcoin Analysis and Outlook

In contrast to the muted gold market, Bitcoin traders are experiencing renewed volatility. The largest cryptocurrency by market capitalization recently surged above $48k, eyeing levels not seen since December 2021. The next target is the January 11 high, just under $49k. Beyond this level, the weekly chart lacks significant resistance before reaching $52k.

The successful launch of several spot Bitcoin Exchange-Traded Funds (ETFs) and anticipation surrounding the upcoming Bitcoin halving event scheduled for April 17 fuel Bitcoin’s recent rally.

The halving is a programmed event that occurs approximately every four years, reducing miners’ rewards for adding new blocks to the Bitcoin network by 50%. This decrease in supply leads to increased scarcity and, coupled with steady or rising demand, drives the price of BTC higher. Previous halving events in 2012 and 2016 resulted in significant changes in BTC mining rewards. In the upcoming halving, expected in mid-April next year, the reward for mining a Bitcoin block will be cut to 3.125 BTC.

Conclusion

As anticipation builds ahead of the US CPI release, the gold market remains listless, awaiting a catalyst to break the current range-bound trading. Meanwhile, Bitcoin continues to impress with its bullish momentum, testing multi-year highs. Traders should closely monitor the upcoming inflation data and keep an eye on Bitcoin’s trajectory, taking note of the potential impact of the halving event and ongoing market developments.

Note: Investors should interpret this article solely for informational purposes and avoid considering it as investment advice. Always conduct thorough research and consult a professional before making investment decisions.

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