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  • Gold price remains confined in a range just above a two-month low touched on Wednesday.
  • Delayed Fed rate cut bets underpin the USD and act as a headwind for the non-yielding metal.
  • Geopolitical tensions in the Middle East help to limit the downside for the safe-haven XAU/USD.

Gold price (XAU/USD) extends its sideways consolidative price move during the Asian session on Thursday and is currently placed just above a two-month low touched the previous day. The hotter-than-expected US inflation data released on Tuesday pushed back expectations for the first interest rate cut by the Federal Reserve (Fed) to the middle of the year and continues to act as a headwind for the non-yielding yellow metal. Meanwhile, hawkish Fed expectations assist the US Dollar (USD) to stall the overnight pullback from its highest level since November 14 and is seen as another factor undermining the commodity.

That said, a further decline in the US Treasury bond yields holds back the USD bulls from placing fresh bets. This, along with the risk of a further escalation of geopolitical tensions, helps limit the downside for the safe-haven Gold price. Meanwhile, the lack of meaningful buying interest and the post-US CPI breakdown through a short-term trading range suggests that the path of least resistance for the XAU/USD remains to the downside. Hence, any attempted recovery might be seen as a selling opportunity and runs the risk of fizzling out rather quickly as traders now look to the US macroeconomic data for a fresh impetus.

Daily Digest Market Movers: Gold price lacks firm intraday direction amid mixed fundamental cues

  • The stronger US consumer inflation figures prompted investors to lower bets for early rate cuts by the Federal Reserve and underpin the US Dollar, capping the upside for the non-yielding Gold price.
  • Fed funds futures have priced out a rate cut in March and see a nearly 80% chance of easing at the June meeting, and about three 25 basis points rate cuts by the end of this year as against five two weeks ago.
  • The US Treasury bond yields retreat further on the back of overnight comments by Chicago Fed President Austan Goolsbee, saying that the central bank should be wary of waiting too long before it cuts rates.
  • Goolsbee indicated that the Fed’s trajectory back towards achieving its 2% inflation target would still be on track even if price increases in the US run a bit hotter-than-expected over the next few months.
  • This keeps a lid on the Greenback, which, along with the risk of a further escalation of geopolitical tensions in the Middle East, lends some support to the safe-haven XAU/USD and helps limit the downside.
  • The Israeli military said on Wednesday its fighter jets began a series of strikes in Lebanon in retaliation to a rocket fired into Northern Israel, raising the risk of a war between the two countries.
  • Meanwhile, negotiations for a ceasefire between Israel and Hamas in Gaza have resumed as the former faces international pressure to stop its bombardment of the southern Gaza city of Rafah.
  • The US Retail Sales figures for January are due for release later during the North American session, with consensus estimates pointing to a 0.1% fall as compared to a flat reading last month.
  • Thursday’s US economic docket also features the Empire State Manufacturing Index, the Philly Fed Manufacturing Index, the usual Weekly Initial Jobless Claims and Industrial Production data.

Technical Analysis: Gold price bears await acceptance below 100-day SMA before placing fresh bets

From a technical perspective, bearish traders need to wait for acceptance below the 100-day Simple Moving Average (SMA) before positioning for any further losses. Given that oscillators on the daily chart are holding deep in the negative territory, the Gold price might then accelerate the fall towards the very important 200-day SMA support, currently pegged near the $1,965 area. A convincing break below the latter should pave the way for a further depreciating move towards an intermediate support near the $1,952-1,950 zone en route to the November 2023 low, around the $1,932-1,931 region.

On the flip side, any attempted recovery beyond the $2,000 mark now seems to confront stiff resistance near the $2,011-2,012 area. That said, some follow-through buying, leading to a subsequent strength beyond the $2,015 level, might trigger a short-covering rally and lift the Gold price to the 50-day SMA, currently around the $2,030 region. The latter should act as a key pivotal point, which if cleared decisively will set the stage for additional gains beyond the $2,044-2,045 intermediate hurdle, towards the $2,065 supply zone.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Japanese Yen.

USD   0.06% 0.03% 0.04% 0.20% -0.19% 0.10% 0.02%
EUR -0.06%   -0.04% -0.02% 0.15% -0.24% 0.06% -0.02%
GBP -0.02% 0.02%   -0.01% 0.17% -0.23% 0.07% 0.00%
CAD -0.04% 0.02% 0.00%   0.17% -0.22% 0.07% 0.00%
AUD -0.18% -0.17% -0.16% -0.16%   -0.40% -0.09% -0.16%
JPY 0.19% 0.24% 0.21% 0.22% 0.38%   0.30% 0.23%
NZD -0.12% -0.06% -0.08% -0.08% 0.07% -0.31%   -0.08%
CHF -0.03% 0.02% 0.00% 0.01% 0.18% -0.22% 0.08%  

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

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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