- Gold price extends its sideways consolidative move through the early European session.
- A goodish pickup in the US bond yields is seen acting as a headwind for the XAU/USD.
- The Fed rates uncertainty and a softer risk tone lend some support to the precious metal.
Gold price (XAU/USD) posted modest gains on Thursday amid a weaker US Dollar (USD), albeit lacked follow-through buying and oscillates in a range below the $2,000 psychological mark through the early European session on Friday. The uncertainty over the Federal Reserve’s (Fed) rate-hike path holds back traders from placing aggressive directional bets and leads to subdued/range-bound price action on the last day of the week.
The softer October US consumer inflation report eliminated any surviving bets of a December rate hike by the Federal Reserve (Fed). Moreover, the markets have been pricing in the possibility of a series of rate cuts in 2024. That said, the FOMC minutes released on Tuesday struck a more hawkish tone. Moreover, Wednesday’s US macro data pointed to signs of resilience in the labor market. Adding to this, a rise in consumer inflation expectations should allow the Fed to keep rates higher for longer. This, along with a goodish pickup in the US Treasury bond yields, acts as a headwind for the non-yielding Gold price.
The markets, however, seem convinced that the US central bank will keep rates steady rather than hiking. This, in turn, fails to assist the US Dollar (USD) to gain any meaningful traction and capitalize on this week’s goodish rebound from its lowest level since August 31. Apart from this, a weaker trading sentiment around the equity markets might continue to lend some support to the safe-haven Gold price and help limit any meaningful downfall. Nevertheless, the XAU/USD remains on track to register the second consecutive weekly gain as traders look to the flash US PMIs for some impetus.
Daily Digest Market Movers: Gold price remains confined in a narrow trading band on Friday
- A combination of diverging forces fails to provide any meaningful impetus to the Gold price and leads to a subdued/range-bound price action during the Asian session on Friday.
- A disconnect between the Federal Reserve’s hawkish outlook and market expectations for rate cuts in 2024 is holding back traders from placing directional bets around the XAU/USD.
- The FOMC meeting minutes released on Tuesday revealed that policymakers backed the case to keep interest rates higher for longer to tame inflation.
- Bets for a rate hike in December shrunk to zero following the release of the October inflation report. Moreover, the markets are pricing over a 25% chance of a rate cut as early as March 2024.
- Wednesday’s upbeat US labor market and consumer sentiment data, along with rebounding US Treasury bond yields, lend support to the USD and cap gains for the precious metal.
- Dovish Fed expectations, meanwhile, warrant some caution for the USD bulls and might continue to lend some support to the commodity ahead of the flash US PMI prints for November.
Technical Analysis: Gold price continues with its struggle to move beyond the $2,000 mark
The Gold price, so far, has been struggling to move back above the $2,000 psychological mark. This comes on top of the recent repeated failures ahead of the $2,010 level, or a multi-month peak touched in October and warrants caution for bullish traders. That said, oscillators on the daily chart are holding comfortably in the positive territory and support prospects for the emergence of some dip-buying near the $1,989-1,988 zone.
This is followed by support near the $1,979-1,978 region and the weekly low, around the $1,965 area. A convincing break below the latter might expose the 200-day Simple Moving Average (SMA), currently around the $1,940 level, and $1,933-1,932 confluence, comprising the
50- and 100-day SMAs.
On the flip side, the $2,000 mark might continue to act as an immediate barrier ahead of the $2,007 area and the $2,009-2,010 region. Some follow-through buying will be seen as a fresh trigger for bullish traders and allow the Gold price to accelerate the positive move further towards the $2,022 resistance en route to the next relevant hurdle near the $2,040 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 weakest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.04% | -0.08% | 0.01% | -0.12% | -0.27% | -0.18% | -0.16% | |
| EUR | 0.07% | -0.01% | 0.08% | -0.06% | -0.20% | -0.11% | -0.10% | |
| GBP | 0.08% | 0.01% | 0.10% | -0.05% | -0.19% | -0.10% | -0.11% | |
| CAD | -0.02% | -0.09% | -0.10% | -0.14% | -0.29% | -0.20% | -0.19% | |
| AUD | 0.12% | 0.06% | 0.04% | 0.13% | -0.15% | -0.05% | -0.04% | |
| JPY | 0.22% | 0.19% | 0.13% | 0.24% | 0.14% | 0.07% | 0.14% | |
| NZD | 0.19% | 0.11% | 0.10% | 0.19% | 0.05% | -0.09% | 0.01% | |
| CHF | 0.17% | 0.11% | 0.09% | 0.19% | 0.04% | -0.10% | 0.00% |
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).
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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