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- Gold price sits near one-week top, bulls flirt with 50-day SMA ahead of FOMC minutes
Gold price sits near one-week top, bulls flirt with 50-day SMA ahead of FOMC minutes
- Gold price attracts some buyers for the fifth successive day amid modest USD weakness.
- Geopolitical risks also benefit the safe-haven XAU/USD and remain supportive of the upward move.
- Elevated US bond yields could act as a headwind ahead of the key FOMC meeting minutes.
Gold price (XAU/USD) trades with a positive bias for the fifth successive day on Wednesday and is currently placed around the $2,030 level, or a one-week high touched the previous day. The said area coincides with the 50-day Simple Moving Average (SMA) and should act as a pivotal point as traders keenly await the release of the FOMC meeting minutes, due later during the US session. Investors will look for cues about the Federal Reserve's (Fed) rate-cut path, which will play a key role in influencing the near-term US Dollar (USD) price dynamics and provide a fresh directional impetus to the non-yielding yellow metal.
In the meantime, growing acceptance that the Fed will lower rates by mid-2024 keeps the USD bulls depressed near its lowest level in over two weeks set on Tuesday and acts as a tailwind for the Gold price. Adding to this, geopolitical risks stemming from conflicts in the Middle East and the prolonged Russia-Ukraine war remain supportive of the bid tone surrounding the safe-haven precious metal. That said, the latest optimism led by hopes that additional stimulus from China will boost global growth and elevated US Treasury bond yields might hold back traders from placing fresh bullish bets around the XAU/USD.
Daily Digest Market Movers: Gold price is backed by bets for an imminent shift in Fed’s policy stance, softer risk tone
- A combination of supporting factors assists the Gold price to steadily climb back closer to a one-week peak and the 50-day SMA barrier during the Asian session on Wednesday.
- The markets are pricing in four 25 basis points interest rate cuts by the Federal Reserve in 2024, starting from June, which weighs on the US Dollar and lends support to the metal.
- Investors remain concerned about the risk of a further escalation of tensions in the Middle East in the wake of a string of attacks on shipping in the Red Sea by Houthi rebels in Yemen.
- US officials said last week that Russia is developing a space-based anti-satellite nuclear weapon, though President Vladimir Putin said that Moscow is against the deployment of nuclear weapons in space.
- A White House official said that the US will announce a major sanctions package against Russia on Friday to hold President Vladimir Putin accountable for the two-year war on Ukraine.
- The People’s Bank of China lowered the five-year loan prime rate by 25 bps – the biggest cut since it was introduced in 2019 – to support real estate developers and bolster economic growth.
- The yield on the benchmark 10-year US government bond holds comfortably above the 4.0% mark as traders keenly await the FOMC meeting minutes for fresh cues about the rate-cut path.
- Hawkish signals from policymakers will likely renew jitters that the Fed will keep rates higher for longer, which, in turn, should boost the buck and may not be good news for the XAU/USD.
Technical Analysis: Gold price bulls await a convincing breakout through the 50-day SMA before placing aggressive bets
From a technical perspective, sustained strength and acceptance above the 50-day SMA will set the stage for an extension of the recent recovery from the $1,984 region, or a two-month low touched last week. Given that oscillators on the daily chart have been gaining positive traction, the Gold price might then accelerate the positive move towards an intermediate hurdle near the $2,044-2,045 region en route to the $2,065 supply zone.
On the flip side, the $2,016-2,015 area could protect the immediate downside ahead of the 100-day SMA, currently pegged near just below the $2,000 psychological mark. Some follow-through selling, leading to a subsequent break through the $1,984 area, or the monthly low, will be seen as a fresh trigger for bearish traders. The subsequent downfall has the potential to drag the Gold price to the very important 200-day SMA support near the $1,965 region.
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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.06% | -0.07% | -0.11% | -0.26% | -0.05% | -0.35% | -0.15% | |
| EUR | 0.07% | -0.01% | -0.04% | -0.19% | 0.00% | -0.28% | -0.08% | |
| GBP | 0.08% | 0.01% | -0.02% | -0.19% | 0.04% | -0.27% | -0.06% | |
| CAD | 0.10% | 0.03% | 0.03% | -0.17% | 0.04% | -0.25% | -0.04% | |
| AUD | 0.27% | 0.19% | 0.18% | 0.16% | 0.21% | -0.09% | 0.12% | |
| JPY | 0.05% | -0.01% | -0.04% | -0.04% | -0.20% | -0.31% | -0.10% | |
| NZD | 0.35% | 0.28% | 0.28% | 0.24% | 0.08% | 0.30% | 0.21% | |
| CHF | 0.14% | 0.08% | 0.06% | 0.04% | -0.12% | 0.10% | -0.21% |
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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