- Gold price flirts with two-week lows below 2,320 early Friday.
- The US Dollar and US Treasury bond yields consolidate weekly gains amid a dour mood.
- Gold price confirms rising wedge breakdown, as RSI flips bearish.
Gold price is nursing losses while flirting with two-week lows near $2,327 in the Asian session on Friday. Gold price extends its losing streak into the fourth straight day, remaining on track to book the first weekly loss in three weeks.
US PMI data and Fed Minutes spell doom for Gold price
Following the downtrend induced by the hawkish Minutes of the US Federal Reserve’s May policy meeting, Gold price witnessed another down day, courtesy of stronger-than-expected business PMI data from the United States (US)
Data on Thursday showed that the preliminary US Composite PMI, which tracks the manufacturing and services sectors, jumped to 54.4 this month, registering the highest level since April 2022 and following a final reading of 51.3 in April.
Robust US data combined with the recent hawkish Fedspeak continued to temper aggressive Fed rate cut bets this year, exerting additional downward pressure on the non-interest-bearing Gold price.
The Fed Minutes released on Wednesday showed that “various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.”
The Minutes also suggested that the Fed officials grew more concerned about the stubbornness of inflation, citing that “the recent monthly data had showed significant increases in components of both goods and services price inflation.”
According to CME Group’s FedWatch Tool, bets that the Fed will cut rates more than once in 2024 reduced significantly.
Further, dampening Fed rate cut expectations weighed negatively on global stocks, infusing safe-haven flows in the US Dollar at the expense of Gold price.
Gold price also bore the brunt from the supply side after Reuters cited a source familiar with the matter, noting that Russian metals giant Nornickel plans a joint project to construct a platinum group metals (PGMs) refinery in Bahrain.
Looking ahead, Gold price appears vulnerable, as the US Dollar has entered a bullish consolidation phase along with the US Treasury bond yields heading into Fed Governor Christopher Waller’s speech, mid-tier US Durable Goods and Consumer Sentiment data.
Risk-aversion has extended into Asian trading on Friday while Gold price licks its wounds, awaiting fresh catalysts for the next push lower.
Gold price technical analysis: Daily chart
Gold price closed Thursday below the lower boundary of a five-week long rising wedge, then at $2,384, validing a downside break of the wedge formation.
In doing so, Gold price also yielded a close below the key 21-day Simple Moving Average (SMA) at $2,347 while the 14-day Relative Strength Index (RSI) pierced the midline for the downside.
These technical moves suggest that the tide seems to have changed in favor of Gold sellers, with a test of the immediate support of 50-day SMA at $2,309 inevitable.
Failure to resist above the latter could expose the May low at $2,277. Further south, the $2,250 psychological level could act as a tough nut to crack for Gold sellers.
If Gold buyers manage to defend the 50-day SMA support at $2,309, a rebound toward the 21-day SMA support-turned-resistance at $2,347 will be in the offing.
Recapturing that level is critical to unleashing the additional recovery toward the previous day’s high of $2,384. Further up, the $2,400 threshold will be challenged.
(This story was corrected on Friday at 06:37 GMT to say that "the $2,250 psychological level could act as a tough nut to crack for Gold sellers," not buyers).
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD holds near 1.0500 ahead of Powell speech
EUR/USD holds steady at around 1.0500 in the American session on Wednesday. The weaker-than-expected ADP Employment Change and the ISM Services PMI data hurt the USD and help the pair keep its footing. Fed Chairman Powell will speak later in the day.
GBP/USD recovers toward 1.2700 after US data
Following a pullback, GBP/USD edges higher toward 1.2700 in the second half of the day on Wednesday as the US Dollar loses strength following the disappointing data releases. Markets eagerly await Fed Chairman Jerome Powell's speech.
Gold advances to $2,650 area as US yields edge lower
Following a consolidation phase near $2,640, Gold gains traction and rises to the $2,650 area. The benchmark 10-year US Treasury bond yield pushes lower after weak macroeconomic data releases from the US, helping XAU/USD stretch higher.
UnitedHealth unit CEO murdered early Wednesday in Manhattan Premium
UnitedHealthcare CEO Brian Thompson was gunned down in Manhattan Wednesday morning. Thompson was shot by a masked gunman as he was in the city for an investor meeting.
Four out of G10
In most cases, the G10 central bank stories for December are starting to converge on a single outcome. Here is the state of play: Fed: My interpretation of Waller’s speech this week is that his prior probability for a December cut was around 75% before the data.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.