Gold price (XAU/USD) struggles to capitalize on its two-day-old recovery trend from over a one-month low and comes under some renewed selling pressure during the Asian session on Monday. The incoming US macro data, including Friday's upbeat consumer sentiment index, suggested that the economy is in good shape. This, along with the recent hawkish comments from a slew of influential Federal Reserve (Fed) policymakers, lowered market expectations of an early rate cut. This, in turn, is seen as a key factor acting as a headwind for the non-yielding yellow metal.
Apart from this, a generally positive tone around the equity markets contributes to a mildly offered tone surrounding the Gold price. That said, a further escalation of geopolitical tensions in the Middle East, along with China's economic woes, might lend some support to the safe-haven XAU/USD. Meanwhile, the flight to safety triggers a modest pullback in the US Treasury bond yields, which keeps the US Dollar (USD) bulls on the defensive. This might further hold back traders from placing aggressive bearish bets around the precious metal and help limit deeper losses.
From a technical perspective, some follow-through below the $2,022-2,020 immediate support will expose the $2,000 psychological mark, or over a one-month low touched last week. The latter should act as a key pivotal point, which if broken decisively could make the Gold price vulnerable. The subsequent downfall has the potential to drag the XAU/USD further towards the $1,988 intermediate support en route to the 100-day Simple Moving Average (SMA), currently around the $1,972 area and the 200-day SMA, near the $1,964-1,963 region.
On the flip side, Friday's swing high, around the $2,040-2,042 supply zone, might continue to act as an immediate strong barrier. A sustained strength beyond could trigger a short-covering rally and lift the XAU/USD towards the $2,077 area. The upward trajectory could extend further and allow bulls to reclaim the $2,100 round-figure mark.
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the .
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | -0.12% | -0.14% | 0.02% | -0.04% | -0.17% | -0.11% | -0.07% | |
EUR | 0.12% | -0.01% | 0.14% | 0.08% | -0.05% | 0.01% | 0.06% | |
GBP | 0.14% | 0.01% | 0.14% | 0.10% | -0.03% | 0.03% | 0.07% | |
CAD | -0.01% | -0.12% | -0.14% | -0.04% | -0.17% | -0.10% | -0.07% | |
AUD | 0.04% | -0.08% | -0.10% | 0.04% | -0.12% | -0.06% | -0.01% | |
JPY | 0.16% | 0.04% | 0.06% | 0.15% | 0.14% | 0.07% | 0.10% | |
NZD | 0.10% | -0.02% | -0.04% | 0.11% | 0.06% | -0.06% | 0.04% | |
CHF | 0.06% | -0.06% | -0.07% | 0.06% | 0.02% | -0.11% | -0.05% |
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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