Gold price (XAU/USD) fails to capitalize on the previous day's modest uptick and oscillates in a narrow range during the Asian session on Tuesday. A slew of influential Federal Reserve (Fed) officials recently tried to push back against market expectations for early interest rate cuts in 2024, which, in turn, is seen as a key factor acting as a headwind for the non-yielding yellow metal. Apart from this, the underlying bullish tone across the global equity markets further contributes to capping the upside for the precious metal.
The US central bank, however, took a dovish turn last week and projected an average of three 25 basis points (bps) of rate cuts in 2024, which keeps the US Dollar (USD) bulls on the defensive and lends some support to the Gold price. Apart from this, the risk of a further escalation of geopolitical tension in the Middle East should help limit any meaningful downside for the safe-haven XAU/USD. Traders might also prefer to wait for a key US inflation reading – the Core PCE Price Index on Friday – before placing directional bets.
From a technical perspective, the Gold price needs to find acceptance above the $2,040 supply zone for bulls to seize near-term control. This is followed by last week's swing high, around the $2,049-2,050 region, which if cleared will set the stage for a move towards the next relevant barrier near the $2,072-2,073 area. The upward trajectory could get extended further and allow the XAU/USD to reclaim the $2,100 round-figure mark.
On the flip side, the $2,015 area might continue to protect the immediate downside ahead of the 2,010 horizontal resistance breakpoint and the $2,000 psychological mark. A convincing break below the latter will make the Gold price vulnerable to challenge the 50-day Simple Moving Average (SMA) support, currently pegged near the $1,985 level before dropping to last week's swing low, around the $1,973 area. Bears might then aim to test the 200-day SMA, near the $1,956 zone.
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Australian Dollar.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | -0.05% | -0.08% | -0.06% | -0.31% | 0.46% | -0.31% | -0.06% | |
EUR | 0.05% | -0.03% | -0.01% | -0.25% | 0.51% | -0.25% | 0.01% | |
GBP | 0.08% | 0.02% | 0.02% | -0.23% | 0.53% | -0.24% | 0.02% | |
CAD | 0.06% | 0.01% | -0.01% | -0.25% | 0.50% | -0.25% | 0.00% | |
AUD | 0.30% | 0.26% | 0.23% | 0.25% | 0.76% | 0.00% | 0.24% | |
JPY | -0.46% | -0.49% | -0.54% | -0.52% | -0.77% | -0.76% | -0.51% | |
NZD | 0.31% | 0.25% | 0.23% | 0.24% | 0.00% | 0.77% | 0.24% | |
CHF | 0.06% | -0.01% | -0.02% | 0.00% | -0.24% | 0.52% | -0.24% |
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 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.
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.
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.
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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