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- Gold price trades with modest intraday gains, sustained USD strength caps gains
Gold price trades with modest intraday gains, sustained USD strength caps gains
- Gold price regains positive traction and stalls its corrective slide from a multi-week top.
- Dovish Fed expectations and geopolitical risks continue to lend support to the XAU/USD.
- Rising US bond yields underpin the US Dollar and might keep a lid on any further gains.
Gold price (XAU/USD) attracts some buyers during the Asian session on Tuesday and for now, seems to have snapped a two-day-old losing streak. The precious metal is currently placed around the $2,070 area, up over 0.30% for the day, although it remains below a multi-week high touched last Thursday amid a relatively thin liquidity on the first trading day of 2024. The US Dollar (USD) prolongs its modest recovery from a five-month low for the third straight day in the wake of a further recovery in the US Treasury bond yields, which, in turn, is seen acting as a headwind for the commodity. That said, growing acceptance that the Federal Reserve (Fed) will soon start cutting interest rates favours bullish traders and supports prospects for additional gains.
Investors are pencilling in a series of rate cuts by the US central bank in 2024 and the bets were lifted by a higher-than-projected decline in the US Core Personal Consumption Expenditure (PCE) Price Index – the Fed's preferred inflation gauge. This comes on top of a still resilient US economy and ensures a soft landing, which should allow the US central bank to start easing its policy sooner rather than later. In fact, the CME group's FedWatch tool indicates a more than 85% chance that the Fed will deliver a rate cut at its March meeting and a cumulative of 150 basis points (bps) rate cut by the year-end. This, in turn, should cap the upside for the US bond yields and hold back the USD bulls from placing fresh bets, validating the positive outlook for the Gold price.
Furthermore, geopolitical instability as well as direct purchases from central banks suggest that the path of least resistance for the XAU/USD is to the upside. Traders, however, might prefer to wait on the sidelines ahead of important US macro releases scheduled at the beginning of a new month, including the closely watched monthly employment details or the NFP report on Friday. This, along with the FOMC meeting minutes on Wednesday, will influence the USD price dynamics and provide some meaningful impetus to the non-yielding Gold price.
Daily Digest Market Movers: Gold price remains supported by dovish Federal Reserve expectations
- Gold price registered a 13% annual rise in 2023, marking its best year since 2020, and seems poised to prolong its recent well-established appreciating trend.
- Hopes that the Federal Reserve will achieve a soft landing for the economy in 2024 and ease its policy as early as March lend support to the yellow metal.
- The US Dollar builds on its recovery from a five-month low amid a further rise in the US Treasury bond yields and might cap further gains for the XAU/USD.
- The yield on the benchmark 10-year US government bond recovered further from its lowest level since July touched last week and underpins the buck.
- Traders now look to the release of FOMC minutes on Wednesday and important US macro releases, including the NFP report, for some meaningful impetus.
- This week's busy economic docket also features the ISM Manufacturing PMI and JOLTS Job Openings on Wednesday, followed by the ADP report on Thursday.
- In the meantime, the safe-haven precious metal could draw support from geopolitical risks stemming from the war in Ukraine and in the Middle East.
Technical Analysis: Gold price could face immediate resistance near the $2,077-2078 region
From a technical perspective, the all-time high closing, around the $2,077-2,078 region printed last Wednesday, now seems to act as an immediate barrier ahead of the $2,088 zone, or the multi-week high. Some follow-through buying should allow the Gold price to reclaim the $2,100 round-figure mark. The subsequent move up has the potential to lift the XAU/USD further towards retesting the record peak, around the $2,144 area set in early December.
On the flip side, the $2,060-2,058 region now seems to protect the immediate downside ahead of the $2,048 horizontal zone and the $2,040 area. Failure to defend the said support levels might turn the Gold price vulnerable to accelerate the slide towards the $2,020 intermediate support en route to the 50-day Simple Moving Average (SMA), currently near the $2,006 region, and the $2,000 psychological mark.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.14% | 0.09% | 0.09% | -0.10% | 0.28% | 0.18% | 0.32% | |
| EUR | -0.14% | -0.04% | -0.04% | -0.22% | 0.15% | 0.05% | 0.18% | |
| GBP | -0.09% | 0.05% | 0.00% | -0.21% | 0.20% | 0.08% | 0.19% | |
| CAD | -0.09% | 0.05% | 0.00% | -0.17% | 0.20% | 0.10% | 0.22% | |
| AUD | 0.10% | 0.22% | 0.17% | 0.17% | 0.37% | 0.26% | 0.39% | |
| JPY | -0.30% | -0.14% | -0.20% | -0.18% | -0.36% | -0.10% | 0.02% | |
| NZD | -0.19% | -0.05% | -0.10% | -0.10% | -0.29% | 0.12% | 0.06% | |
| CHF | -0.32% | -0.15% | -0.20% | -0.20% | -0.43% | -0.01% | -0.11% |
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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