- Gold price turns red for the first time in six trading days ahead of US jobs data on Tuesday.
- US Dollar rebounds on pared June Fed rate cut bets after sold ISM Manufacturing PMI.
- Gold price corrects after hitting the Bull Flag target at $2,251, where next?
Gold price is in the red zone near $2,250 early Tuesday, consolidating the corrective move lower from the record high of $2,266 set on Monday. All eyes now turn toward a fresh batch of US economic data and a flurry of Fedspeak for the next trading impetus in Gold price.
Gold price awaits US JOLTs jobs data, Fedspeak
Amidst a pause in the US Dollar upsurge, weak US Treasury bond yields and a cautious market mood, Gold price is treading water, as traders anticipate the US JOLTS Job Opening data and the Fed commentaries for the next move in Gold price.
Resurfacing China’s property market woes and mounting risks of Japanese forex market intervention keep investors on edge, underpinning the sentiment around the US Dollar even though the US Treasury bond yields are reversing a part of Monday’s rally.
The US Dollar rallied hard alongside the US Treasury bond yields after markets pared back US Federal Reserve (Fed) June interest rate cut bets on stronger-than-expected US ISM Manufacturing PMI and Price Paid data.
“The ISM said its manufacturing PMI increased to 50.3 last month, the highest and first reading above 50 since September 2022, from 47.8 in February. The rebound ended 16 straight months of contraction in manufacturing,” per Reuters.
Markets are now pricing a 58% probability of a June Fed rate cut, down from 68% seen before the US PMI release.
Focus now remains on a bunch of Fed officials who are due to speak at their respective events later on Tuesday for fresh cues on the Fed’s interest rate outlook, especially after Fed Chair Jerome Powell said Friday that “the economy is strong” and there is “no hurry to cut rates.”
Gold price technical analysis: Daily chart
As well predicted Gold price corrected after achieving the Bull Flag target of $2,251 and a fresh record high at $2,266 on Monday.
So far this Tuesday, Gold price is trading cautiously, as the 14-day Relative Strength Index (RSI) has turned lower while within the extremely overbought zone, trading near 78.00. This suggests that a further retreat looks likely in Gold price.
The immediate support is now seen at the previous record high of $2,236 set on Thursday. A breach of the latter could fuel a sharp drop toward the $2,200 thresold.
Further south, Thursday’s low of $2,187 will be challenged, followed by the bullish 21-day Simple Moving Average (SMA) at $2,168.
Should Gold buyers regain upbeat momentum, a retest of the all-time high at $2,266 will be in the offing, followed by the $2,270 round number.
The next on Gold buyers’ radars will be the $2,300 psychological level.
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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