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- Gold price remains below multi-month top as traders look to US PCE data for fresh impetus
Gold price remains below multi-month top as traders look to US PCE data for fresh impetus
- Gold price gains traction for the third straight day and remains closer to a multi-month peak.
- The risk of an escalation in Middle East tensions continues to underpin the safe-haven metal.
- Bets for further policy tightening by the Fed might cap gains ahead of the US PCE Price Index.
Gold price (XAU/USD) attracts some dip-buying during the Asian session on Friday – marking the third successive day of a positive move – and draws support from steady safe-haven demand, fuelled by the Middle East conflict. Apart from this, subdued US Dollar (USD) price action turns out to be another factor underpinning the commodity. The precious metal, however, remains below a five-month peak touched last Friday in the wake of expectations that the Federal Reserve (Fed) will keep interest rates higher for longer.
Traders also seem reluctant to place aggressive directional bets around the Gold price and prefer to wait on the sidelines ahead of the release of the Personal Consumption Expenditure (PCE) Price Index from the United States (US). The data will influence market expectations about the Fed's policy move next week, which, in turn, will influence the USD price dynamics and provide some meaningful impetus to the non-yielding yellow metal. Nevertheless, the XAU/USD seems poised to register modest gains for the third straight week.
Daily Digest Market Movers: Gold price remains well within the striking distance of a multi-month top set last week
- Geopolitical tensions continue to underpin the safe-haven Gold price, though hawkish Federal Reserve expectations hold back bulls from placing aggressive bets.
- Israeli troops and tanks carried out a brief yet relatively large ground incursion into Gaza on Thursday ahead of the widely expected full-scale ground invasion.
- The US military launched airstrikes early Friday on two locations in eastern Syria in retaliation to a slew of drone and missile attacks against American troops in the region.
- US President Joe Biden sends a direct message to Iran's Supreme Leader and warns against targeting US bases and personnel in the Middle East.
- Data released on Thursday showed that the US economy expanded by a 4.9% annualized pace in the third quarter – its fastest growth in nearly two years.
- The US economic resilience should allow the Fed to stick to its hawkish stance and keep the door open for one more rate hike by the year-end.
- The release of weaker-than-expected US inflation and disposable income data reaffirm bets that the Federal Reserve will maintain the status quo in November.
- Investors now look forward to the release of the US PCE Price Index data for cues about the Fed's next policy move and before placing fresh directional bets.
Technical Analysis: Gold price needs to break through the $2,000 mark for bulls to reaffirm near-term control
From a technical perspective, the Relative Strength Index (RSI) on the daily chart is hovering around the 70 mark. This suggests that the Gold price is nearing overbought territory and warrants some caution for bullish traders. Hence, any subsequent move up might continue to confront stiff resistance ahead of the $2,000 psychological mark. The said handle should act as a key pivotal point for short-term traders, which if cleared decisively should pave the way for a move towards the next relevant hurdle near the $2,022 area.
On the flip side, the $1,980 region is likely to protect the immediate downside ahead of the $1,972-$1,970 zone. A convincing break below the latter could drag the Gold price back towards the weekly low, around the $1,953-1,952 zone touched on Tuesday. Some follow-through selling could expose a technically significant 200-day Simple Moving Average (SMA) support, currently pegged near the $1,932-1,931 region.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.24% | 0.25% | 0.75% | -0.30% | 0.24% | 0.11% | 0.56% | |
| EUR | -0.24% | 0.00% | 0.51% | -0.53% | -0.01% | -0.13% | 0.35% | |
| GBP | -0.23% | 0.00% | 0.51% | -0.53% | 0.01% | -0.14% | 0.36% | |
| CAD | -0.75% | -0.51% | -0.52% | -1.05% | -0.51% | -0.65% | -0.16% | |
| AUD | 0.30% | 0.56% | 0.55% | 1.04% | 0.55% | 0.39% | 0.88% | |
| JPY | -0.24% | 0.00% | -0.02% | 0.50% | -0.55% | -0.13% | 0.35% | |
| NZD | -0.10% | 0.14% | 0.14% | 0.64% | -0.39% | 0.15% | 0.49% | |
| CHF | -0.60% | -0.36% | -0.35% | 0.15% | -0.89% | -0.35% | -0.49% |
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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