- Gold price attracts some buyers amid the prevailing USD selling bias.
- The optimism surrounding the Israel-Iran truce acts as a headwind for the commodity.
- Traders now look forward to the US macro data for a fresh impetus.
Gold price (XAU/USD) is trading with a mild positive bias for the second consecutive day on Thursday, albeit lacking follow-through amid mixed fundamental cues. The US Dollar (USD) sinks to its lowest level since March 2022 as US President Donald Trump’s fresh attack fuels concerns about the potential erosion of the US Federal Reserve’s (Fed) independence. Adding to this, the growing acceptance that the US central bank will lower borrowing costs further this year turns out to be a key factor acting as a tailwind for the non-yielding yellow metal.
Meanwhile, a ceasefire between Israel and Iran is holding for now, and the optimism continues to underpin the global risk sentiment. This, in turn, keeps a lid on the safe-haven Gold price and warrants some caution for bullish traders. Market players now look forward to the US macro data, which, along with speeches from influential FOMC members, could provide a fresh impetus to the bullion later during the North American session. The focus, however, remains on the release of the US Personal Consumption and Expenditure (PCE) Price Index on Friday.
Daily Digest Market Movers: Gold price draws support from a weaker USD and Fed rate cut bets
- US President Donald Trump escalated his criticism of Federal Reserve Chair Jerome Powell for not cutting rates and said he was considering several candidates to replace him. In fact, Powell reiterated on Wednesday that the central bank is well-positioned to wait to cut interest rates until the inflationary effects of Trump’s wide-ranging tariffs are better known.
- The Trump-Powell standoff comes on top of bets that the Fed would cut interest rates by at least 50 basis points before the end of the year. This, in turn, drags the US Dollar to over a three-year low and assists the non-yielding Gold price to attract some buyers for the second straight day on Thursday, though the intraday uptick seems to lack bullish conviction.
- The fragile truce between Israel and Iran continues to hold, with Trump declaring victory despite the uncertainty regarding the extent of the damage to Iran’s uranium enrichment assets. Nevertheless, the optimism holds back the XAU/USD bulls from placing aggressive bets and warrants some caution before positioning for any further appreciating move.
- Moving ahead, traders now look to the US economic docket – featuring the release of the final Q1 GDP print, the usual Weekly Jobless Claims, Durable Goods Orders, and Pending Home Sales. Apart from this, investors will closely scrutinize comments from FOMC members for cues about the Fed’s rate-cut path, which should influence the commodity.
- The market attention will then shift to the US Personal Consumption and Expenditure (PCE) Price Index, due on Friday. The crucial inflation data will play a key role in determining the next leg of a directional move for the USD and influence the bullion, which, so far, has been struggling to register any meaningful recovery from over a two-week low.
Gold price mixed technical setup warrants caution before positioning for a firm near-term direction
From a technical perspective, this week’s breakdown below the lower end of a short-term ascending channel was seen as a key trigger for the XAU/USD bears. However, neutral oscillators on daily/4-hour charts and a failure to find acceptance below the $3,300 mark warrant some caution. Hence, it will be prudent to wait for some follow-through selling below the said handle before positioning for any further losses toward the $3,245 region. The downward trajectory could extend further and drag the Gold price to the $3,210-$3,200 horizontal support en route to the $3,175 area.
On the flip side, any subsequent move-up is likely to attract fresh sellers and remain capped near the $3,368-3,370 region, or the trend-channel support breakpoint. A sustained strength beyond could allow the Gold price to reclaim the $3,400 round figure, which, if cleared decisively, could negate the negative outlook and shift the near-term bias in favor of bullish traders. The XAU/USD might then climb to the $3,434-3,435 intermediate hurdle en route to the $3,451-3,452 zone, or a nearly two-month top touched last week, and the all-time peak, around the $3,500 psychological mark.
Gold FAQs
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.
