Gold price (XAU/USD) is seen oscillating in a narrow range during the Asian session on Monday and consolidating last week's strong gains to the $2,088-2,089 region, or its highest level since December 28. The US Dollar (USD) continues to be undermined by the disappointing release of the US ISM survey on Friday, which showed that manufacturing sector activity contracted more than anticipated in February. Adding to this, the less hawkish remarks by several Federal Reserve (Fed) officials reinforced bets that the US central bank will start cutting interest rates at the June policy meeting. This, in turn, is seen as a key factor acting as a tailwind for the non-yielding yellow metal.
Bulls, however, seem reluctant to place fresh bets around the Gold price and prefer to wait for more cues about the Fed's rate-cut path. Apart from this, the latest optimism over Gaza ceasefire talks further contributes to capping the upside for the safe-haven precious metal ahead of this week's important US macro releases, including the closely watched monthly employment details on Friday. Furthermore, Fed Chair Jerome Powell's congressional testimony on Wednesday and Thursday should influence the USD and provide some meaningful impetus to the XAU/USD. In the meantime, the commodity could extend the consolidative price move in the absence of any relevant data on Monday.
From a Technical perspective, Friday's breakout through the $2,062-2,064 horizontal barrier was seen as a fresh trigger for bullish traders and supports prospects for additional gains. That said, the Relative Strength Index (RSI) on the daily chart is hovering near the overbought zone and holding back bulls from placing fresh bets. This makes it prudent to wait for some near-term consolidation before positioning for an extension of a nearly three-week-old uptrend.
In the meantime, the aforementioned resistance breakpoint, around the $2,064-2,062 region, now seems to protect the immediate downside. Sustained weakness below, however, might prompt aggressive technical selling and expose the 50-day Simple Moving Average (SMA) support, currently pegged near the $2,034 area. The latter should at as a key pivotal point, which if broken decisively will negate the positive outlook and shift the bias in favour of bearish traders.
On the flip side, the $2,088 zone, or over a two-month high touched on Friday, now seems to act as an immediate hurdle ahead of the $2,100 round figure. Some follow-through buying has the potential to lift the Gold price further towards the $2,025-2,030 intermediate hurdle en route to the all-time peak, around the $2,144-2,145 zone touched early December.
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Swiss Franc.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | -0.03% | -0.04% | 0.05% | 0.11% | 0.04% | 0.09% | -0.07% | |
EUR | 0.02% | -0.02% | 0.07% | 0.13% | 0.06% | 0.12% | -0.04% | |
GBP | 0.05% | 0.02% | 0.09% | 0.15% | 0.09% | 0.14% | -0.02% | |
CAD | -0.05% | -0.06% | -0.09% | 0.06% | -0.01% | 0.04% | -0.10% | |
AUD | -0.11% | -0.13% | -0.15% | -0.06% | -0.07% | -0.01% | -0.17% | |
JPY | -0.04% | -0.07% | -0.12% | -0.01% | 0.06% | 0.04% | -0.11% | |
NZD | -0.09% | -0.12% | -0.14% | -0.05% | 0.01% | -0.06% | -0.16% | |
CHF | 0.07% | 0.04% | 0.02% | 0.12% | 0.17% | 0.10% | 0.16% |
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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