- Gold price attracts some follow-through buyers in the wake of dovish Fed expectations.
- The markets have started pricing in the possibility of a rate cut in the first half of 2024.
- The XAU/USD remains on track to end on a positive note for the first time in three weeks.
Gold price (XAU/USD) trades with a positive bias for the second straight day on Friday – also marking the fourth day of a move up in the previous five – and is currently placed just below a nearly two-week high touched the previous day. The incoming macro data from the United States (US) cemented bets for an extended pause by the Federal Reserve (Fed). Moreover, the markets are starting to look forward to interest rate cuts, perhaps in the first half of 2024, which leads to the recent decline in the US Treasury bond yields and continues to act as a tailwind for the non-yielding yellow metal.
Dovish Fed expectations, meanwhile, fail to assist the US Dollar (USD) to register any meaningful recovery from its lowest level since September 1 touched in the aftermath of the softer US consumer inflation figures on Tuesday. Apart from this, mixed signals from high-level US-China talks turn out to be another factor benefitting the safe-haven Gold price and supporting prospects for a further near-term appreciating move. Nevertheless, the XAU/USD remains on track to register weekly gains of nearly 2.5% and snap a two-week losing streak to its lowest level since October 18 touched on Monday.
Daily Digest Market Movers: Gold price continues to draw support from dovish Fed expectations and subdued US Dollar price action
- Gold has now recovered over $50 from a multi-week low, around the $1,932-1,931 area touched on Monday in the wake of bets that the Federal Reserve is done raising interest rates.
- The US CPI report released earlier this week indicated that consumer inflation was cooling faster than anticipated, while the US Jobless Claims on Thursday pointed to a cooling labour market.
- The headline CPI was unchanged in October, while the yearly rate registered its smallest rise in two years and decelerated sharply to 3.2% from 3.7% in September.
- The number of Americans who filed for unemployment insurance for the first time rose to 231K during the week of November 11 from the 218K previous (revised from 217K).
- Furthermore, the recent slump in Oil prices is expected to have a disinflationary effect, which should bring the Fed closer to its 2% target and allow it to soften its hawkish stance.
- A slew of influential Fed officials this week acknowledged the progress to curb inflation, reinforcing the idea that the policy-tightening campaign may soon be over.
- Traders now seem convinced that interest rates in the US will not go higher. Furthermore, the CME Group’s FedWatch Tool indicates the rising possibility of the first rate cut by March 2024.
- The yield on the benchmark 10-year US government bond dropped to a near two-month low on Thursday and continues to undermine the US Dollar, lending support to the Gold price.
- US President Joe Biden and his Chinese counterpart Xi Jinping agreed to reopen military channels, prompting some improvement in relations between the world’s two largest economies.
- Hours after the summit, Biden called Xi a “dictator”, which might have possibly annoyed Chinese authorities.
- Traders now look to the US housing market data and a scheduled speech by Chicago Fed President Austan Goolsbee for short-term opportunities on the last trading day of the week.
Technical Analysis: Gold price seems poised to reclaim the $2,000 psychological mark and test a multi-month peak near the $2,009-2,010 area
From a technical perspective, a sustained move and acceptance above the $1,980 level might have already set the stage for further gains. Moreover, oscillators on the daily chart are holding comfortably in the positive territory and are still far from being in the overbought zone. This, in turn, suggests that the path of least resistance for the Gold price is to the upside and supports prospects for a move towards reclaiming the $2,000 psychological mark. The momentum could get extended further towards a multi-month peak, around the $2,009-$2,010 area, which if cleared decisively will be seen as a fresh trigger for bullish traders.
On the flip side, the $1,975 region now seems to protect the immediate downside ahead of the $1,970 level and the $1,962-1,961 support zone. Some follow-through selling, leading to a subsequent break below the $1,955 area, might shift the bias in favour of bearish traders and make the Gold price vulnerable to accelerate the slide back towards the 200-day Simple Moving Average (SMA), currently around the $1,937-1,936 region. This is followed by the 100- and the 50-day SMAs confluence, around the $1,929-1,927 zone, which if broken should pave the way for some meaningful depreciating move in the near term.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -1.53% | -1.46% | -0.35% | -1.59% | -0.60% | -1.11% | -1.54% | |
| EUR | 1.51% | 0.08% | 1.16% | -0.06% | 0.92% | 0.42% | -0.01% | |
| GBP | 1.44% | -0.07% | 1.10% | -0.13% | 0.85% | 0.36% | -0.08% | |
| CAD | 0.35% | -1.17% | -1.10% | -1.23% | -0.24% | -0.74% | -1.18% | |
| AUD | 1.57% | 0.06% | 0.12% | 1.21% | 0.97% | 0.48% | 0.05% | |
| JPY | 0.59% | -0.93% | -0.86% | 0.24% | -0.98% | -0.49% | -0.94% | |
| NZD | 1.11% | -0.43% | -0.36% | 0.73% | -0.48% | 0.49% | -0.44% | |
| CHF | 1.52% | 0.01% | 0.08% | 1.17% | -0.05% | 0.92% | 0.44% |
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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