- Gold price gains strong positive traction on Monday and spikes to a fresh all-time peak.
- The cautious market mood, along with dovish Fed expectations, benefits the XAU/USD.
- Overstretched conditions on the daily chart, reviving USD demand prompt profit-taking.
Gold price (XAU/USD) builds on its recent strong rally witnessed over the past three weeks or so and surges to a fresh record high, around the $2,144-2,145 region during the Asian session on Monday. The precious metal, however, surrendered a major part of its intraday gains and currently trades below the $2,100 mark, still up around 0.70% for the day. A modest uptick in the US Treasury bond yields assists the US Dollar (USD) in attracting some buyers and forces bulls to take some profits off the table amid overbought conditions on the daily chart. That said, firming expectations that the Federal Reserve (Fed) is done raising interest rates and may begin easing its monetary policy by the first half of 2024 might continue to act as a tailwind for the non-yielding yellow metal.
Meanwhile, a further escalation of tensions in the Middle East and fears of another COVID-19-like respiratory illness outbreak in China temper investors’ appetite for riskier assets. This is evident from the prevalent cautious mood around the equity markets, which further contributes to limiting the downside for the safe-haven Gold price. Traders might also refrain from placing fresh directional bets and prefer to wait for this week’s important US macro data, scheduled at the beginning of a new month. In the meantime, Monday’s release of the Factory Orders data from the US might influence the USD and provide some impetus to the XAU/USD later during the early North American session. Nevertheless, the fundamental backdrop warrants some caution for aggressive bearish traders.
Daily Digest Market Movers: Gold price might continue to find support from a softer risk tone and dovish Fed hopes
- The global risk-on rally hit a roadblock after an attack on an American warship and commercial vessels in the Red Sea on Sunday by Iran-backed Houthi rebels in Yemen.
- A US military official confirmed that a “self-defence strike on an imminent threat” killed five Iraqi militants near the northern city of Kirkuk on Sunday afternoon.
- The risk of a further escalation of geopolitical tensions in the Middle East, along with a surge in cases of respiratory illnesses in China, boosts the safe-haven Gold price.
- This comes on the back of growing acceptance that the Federal Reserve (Fed) will maintain the status quo in December and start cutting rates as early as March 2024.
- Fed Jerome Powell on Friday said that it would be premature to conclude when policy might ease, pushing back against speculations of more aggressive rate cuts.
- Investors, however, seem convinced about an imminent shift in the Fed’s policy stance, which drags the benchmark 10-year US Treasury yield to a 12-week low.
- Dovish Fed expectations, meanwhile, keep the US Dollar bulls on the defensive and lend additional support to the XAU/USD ahead of this week’s important US macro data.
- This week’s US economic docket highlights the release of the ISM Services PMI on Tuesday, followed by the ADP report on private-sector employment on Wednesday and the US crucial NFP report on Friday.
- A recent survey by the World Gold Council showed that 24% of all central banks intend to increase their Gold reserves in the next 12 months, as they increasingly grow pessimistic about the US as a reserve asset.
Technical Analysis: Gold price bulls have the upper hand despite the intraday pullback from a fresh all-time high
From a technical perspective, the intraday pullback drags the precious metal below the 23.6% Fibonacci retracement level of the rally from the November monthly swing low, around the $1,932-$1,931 region. The Relative Strength Index (RSI) on the daily chart is flashing extremely overbought conditions and holding back bulls from placing fresh bets around the Gold price.
Any further pullback, however, is likely to find support near the $2,079-2,080 area, or the previous all-time peak touched in May, below which the XAU/USD could slide to the 38.2% Fibo. level, around the $2063-2,062 zone. On the flip side, move back above the $2,095-2,100 immediate hurdle might now confront some resistance near the $2,118 area. Some follow-through buying should allow the Gold price to retest the record high around the $2,144-$2,145 region, which if cleared will reinforce the near-term positive outlook and pave the way for additional gains.
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 | 0.15% | 0.30% | 0.22% | 0.39% | 0.27% | 0.31% | 0.32% | |
| EUR | -0.15% | 0.17% | 0.08% | 0.26% | 0.11% | 0.17% | 0.19% | |
| GBP | -0.32% | -0.15% | -0.08% | 0.09% | -0.03% | 0.00% | 0.01% | |
| CAD | -0.21% | -0.06% | 0.09% | 0.18% | 0.04% | 0.11% | 0.11% | |
| AUD | -0.39% | -0.25% | -0.09% | -0.18% | -0.14% | -0.07% | -0.07% | |
| JPY | -0.30% | -0.10% | 0.20% | -0.03% | 0.16% | 0.06% | 0.06% | |
| NZD | -0.31% | -0.16% | -0.01% | -0.09% | 0.08% | -0.04% | -0.01% | |
| CHF | -0.33% | -0.18% | 0.00% | -0.08% | 0.10% | -0.06% | 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).
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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