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- Gold price holds steady below 2-1/2 month top on Middle East conflict, ahead of Fed’s Powell
Gold price holds steady below 2-1/2 month top on Middle East conflict, ahead of Fed’s Powell
- Gold price trades with a positive bias for the third successive day on Thursday.
- Geopolitical risks continue to underpin demand for the safe-haven XAU/USD.
- Hawkish Fed expectations, rising US bond yields and stronger USD cap gains.
Gold price (XAU/USD) gained strong positive traction on Wednesday and shot to its highest level since early August, around the $1,962-1,963 area in the wake of the risk of an escalation in the Middle East conflict. That said, a further rise in the US Treasury bond yields, bolstered by expectations that the Federal Reserve (Fed) will keep rates higher for longer, capped gains for the non-yielding yellow metal. Apart from this, a pickup in the US Dollar (USD) demand prompted some profit-taking at higher levels and led to a modest pullback.
The retracement slide, however, lacked follow-through and stalled near the $1,938 region. Geopolitical tensions continue to drive some haven flows, allowing the Gold price to trade in the positive territory for the third successive day on Thursday. That said, bulls seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of Fed Chair Jerome Powell's speech. Traders will look for fresh cues about the Fed’s future rate-hike path, which, in turn, will drive the USD and provide some meaningful impetus to the XAU/USD.
Daily Digest Market Movers: Gold price remains supported by the Israel-Hamas war
- The safe-haven Gold price continues to draw support from concerns that the Israel-Hamas conflict could spill over to the rest of the Middle East region.
- Egyptian and Palestinian leaders called off a summit with US President Joe Biden after a blast at a Gaza hospital reportedly killed hundreds of Palestinians.
- The UK Times reported that Israeli PM Netanyahu has won private backing from President Biden to press ahead with a ground invasion of Gaza.
- Biden said that the US will make sure Israel has what it needs to defend itself and that Hamas has committed atrocities that make ISIS look more rational.
- The upbeat US Retail Sales figures released on Tuesday suggested that the economy ended the third quarter on a strong note and lifted Q3 GDP estimates.
- The data also pushed up fears of sticky inflation, which could allow the Federal Reserve to stick to its hawkish stance and keep interest rates higher for longer.
- This, in turn, leads to a further rise in the US Treasury bond yields and continues to underpin the US Dollar, which is seen capping gains for the XAU/USD.
- The yield on the benchmark 10-year US government bond climbs to a fresh 16-year peak and moves well within the striking distance of the 5% psychological mark.
- Investors now look to the US Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Existing Home Sales data for short-term impetus.
- The focus will remain glued to Fed Chair Jerome Powell's scheduled speech, which will be scrutinized closely for cues about the future rate hike path.
Technical Analysis: Gold price seems poised to build on its recent strong appreciating move
From a technical perspective, the overnight sustained breakout through the 200-day Simple Moving Average (SMA) and a subsequent strength beyond the $1,947-1,948 supply zone was seen as a fresh trigger for bulls. Moreover, oscillators on the daily chart are holding in the positive territory and are still far from being in the overbought zone. This, in turn, suggests that the path of least resistance for the Gold price is to the upside. That said, it will still be prudent to wait for some follow-through buying beyond the overnight swing high, around the $1,962-1,963 region, before positioning for any further gains. The XAU/USD might then accelerate the momentum towards the $1,982 intermediate hurdle and then aim to reclaim the $2,000 psychological mark for the first time since May.
On the flip side, weakness below the $1,948-1,947 area is likely to find decent support near the 200-day SMA, currently around the $1,930 region. This is closely followed by the 100-day SMA, around the $1,922 area ahead of the $1,930 support zone, below which the Gold price could slide back to challenge the $1,900 round figure. The latter coincides with the 50-day SMA and should act as a strong base for the XAU/USD. A convincing break below will negate the positive outlook and shift the near-term bias in favour of bearish traders.
US Dollar price in the last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.83% | 1.53% | 1.02% | 1.84% | 0.51% | 3.18% | -0.21% | |
| EUR | -0.85% | 0.69% | 0.17% | 1.00% | -0.33% | 2.36% | -1.06% | |
| GBP | -1.56% | -0.70% | -0.52% | 0.31% | -1.03% | 1.68% | -1.78% | |
| CAD | -1.03% | -0.20% | 0.51% | 0.80% | -0.52% | 2.18% | -1.26% | |
| AUD | -1.87% | -1.01% | -0.31% | -0.84% | -1.34% | 1.38% | -2.09% | |
| JPY | -0.51% | 0.32% | 1.02% | 0.51% | 1.35% | 2.68% | -0.72% | |
| NZD | -3.29% | -2.42% | -1.71% | -2.24% | -1.40% | -2.75% | -3.50% | |
| CHF | 0.21% | 1.06% | 1.74% | 1.22% | 2.02% | 0.72% | 3.38% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Gold FAQs
Why do people invest in Gold?
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Who buys the most Gold?
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
How is Gold correlated with other assets?
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
What does the price of Gold depend on?
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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