- Gold price comes under some renewed selling amid reduced bets for an early Fed rate cut.
- Geopolitical risks and the uncertain global economic outlook to limit losses for the XAU/USD.
- Traders might also refrain from placing aggressive directional bets ahead of key US data.
Gold price (XAU/USD) meets with a fresh supply during the Asian session on Wednesday and erodes a part of the overnight modest gains back closer to the $2,040-2,042 supply zone. The precious metal, however, remains confined in a multi-day-old trading range as traders seek clarity over the timing of when the Federal Reserve (Fed) will start cutting interest rates. Hence, the focus will remain glued to this week’s important US macro releases – starting with the flash PMIs later today, followed by the Advance Q4 GDP on Thursday and the Personal Consumption Expenditures (PCE) Price Index on Friday.
In the meantime, investors have been scaling back their expectations for an early interest rate cut by the Fed in the wake of a resilient US economy. Furthermore, several Fed officials last week emphasized the need for more inflation data before any judgment on interest rates could be made. This, in turn, assists the US Dollar (USD) to stand tall near its highest level since December 13 touched on Tuesday and is seen as a key factor weighing on the Gold price. That said, geopolitical tensions, along with worries about slowing economic growth in China, could lend support to the safe-haven XAU/USD.
Daily Digest Market Movers: Gold price is pressured by rising bets for a delayed Fed rate cut
- The incoming US macro data suggested that the economy is in good shape and gives the Federal Reserve more headroom to keep interest rates higher for longer, which, in turn, acts as a headwind for the Gold price.
- The current market pricing indicates a greater chance of the first interest rate cut by the Fed in May, which was initially expected in March, and less aggressive policy easing than is now anticipated by investors.
- The US Dollar (USD) consolidates near a multi-week top and exerts some pressure on the non-yielding metal, though geopolitical risk and the uncertain global economic outlook should help limit deeper losses.
- US military forces struck 3 facilities used by Iranian-affiliated militant groups in western Iraq in direct response to a series of escalatory attacks, raising the risk of a further escalation of tensions in the Middle East.
- Traders also seem reluctant to place aggressive directional bets and prefer to wait on the sidelines ahead of this week’s key US macro releases – the flash PMIs, the Advance Q4 GDP print and the Core PCE Price Index.
- The crucial data will play a key role in influencing market expectations about the Fed’s future policy actions, which, in turn, will drive the USD demand and determine the near-term trajectory for the XAU/USD.
Technical Analysis: Gold price oscillates in a multi-day-old trading range; bearish potential intact
From a technical perspective, the $2,022-2,020 region might offer some support to the Gold price ahead of the weekly trough, around the $2,017-2,016 zone touched on Monday. This is followed by over a one-month low, around the $2,000 psychological mark set last week, which if broken decisively will be seen as a fresh trigger for bearish traders. The XAU/USD might then turn vulnerable to accelerate the fall towards the $1,988 intermediate support before eventually dropping to the 100-day Simple Moving Average (SMA), currently around the $1,972 area, en route to and the 200-day SMA, near the $1,964-1,963 region.
On the flip side, any meaningful strength beyond the $2,029-2,030 immediate hurdle might continue to confront stiff resistance near the $2,040-2,042 supply zone. Some follow-through buying, however, might negate the near-term bearish outlook and trigger a short-covering rally. The Gold price might then climb to the $2,077 area before aiming to reclaim the $2,100 round-figure mark.
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 Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.02% | -0.06% | 0.11% | 0.19% | -0.25% | 0.09% | -0.01% | |
| EUR | 0.02% | -0.04% | 0.13% | 0.18% | -0.22% | 0.10% | 0.01% | |
| GBP | 0.07% | 0.04% | 0.17% | 0.23% | -0.18% | 0.14% | 0.05% | |
| CAD | -0.12% | -0.10% | -0.17% | 0.06% | -0.36% | -0.03% | -0.12% | |
| AUD | -0.18% | -0.18% | -0.23% | -0.07% | -0.38% | -0.11% | -0.19% | |
| JPY | 0.24% | 0.22% | 0.19% | 0.34% | 0.44% | 0.31% | 0.23% | |
| NZD | -0.07% | -0.11% | -0.15% | 0.02% | 0.10% | -0.31% | -0.10% | |
| CHF | -0.01% | -0.03% | -0.07% | 0.13% | 0.22% | -0.23% | 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.