Gold Price Forecast: XAU/USD firms up at the onset of 2024, looks to US jobs data
- Gold price kicks off 2024 in the green after booking the best year in three in 2023.
- The US Dollar tracks the US Treasury bond yields higher, as the mood remains mixed.
- Gold price looks to take out $2,100 as the daily technical setup remains in favor of buyers.
Gold price has started off the first trading day of 2024 on the front foot, having eked out a 14% annual gain in 2023. Gold price is finding fresh demand early Tuesday, despite an uptick in the US Dollar (USD) and the US Treasury bond yields.
Gold price looks to top-tier US jobs data for fresh impetus
Lingering Middle-East geopolitical risks keep investors on the edge starting out a new year, keeping the sentiment around the traditional safe-haven Gold underpinned.
Citing accounts by American, Maersk, and Houthi officials, Reuters reported on Tuesday that US helicopters repelled an attack on Sunday by Iran-backed Houthi militants on a Maersk container vessel in the Red Sea, sinking three Houthi ships and killing 10 militants.
Markets remain wary that this strife combined with the ongoing Israel-Gaza conflict could translate into a wider regional discord, scurrying for safety in havens such as Gold, the US Dollar, etc.
Meanwhile, the US Dollar is also drawing support from an extended recovery in the US Treasury bond yields, as investors’ focus now shifts toward the top-tier US economic data releases this week to revertebrate interest rate cut expectations from the US Federal Reserve (Fed) for this year. Markets are pricing in a 72% chance of a March Fed rate cut while for the May meeting stands at 84%.
Further, the latest factory data from China suggested a fragile recovery, which could potentially hinder the region’s broader revival in demand. The data failed to inspire risk sentiment, keeping the Gold price afloat. China's manufacturing activity shrank for a third straight month in December and weakened more than expected, the official data published by China’s National Bureau of Statistics (NBS) showed Sunday. On Tuesday, China’s Caixin Manufacturing PMI showed a modest improvement to 50.8 in December.
Looking ahead, the final manufacturing PMI data from Europe and the US will fill in a relatively quiet economic calendar at the onset of 2024, with all eyes glued to the key US jobs data due to be released all through this week.
Wednesday will see the JOLTs Job Openings data while the ADP employment change and the Nonfarm Payrolls report will be published on Thursday and Friday respectively. Wednesday’s Minutes of the Fed’s December meeting will be also closely scrutinized for fresh insights on the central bank’s interest rates outlook this year.
Gold price technical analysis: Daily chart
As observed on the daily chart, the rising trendline resistance, now at $2,090, will remain a tough nut to crack for Gold price on its renewed upside.
Acceptance above the latter on a daily candlestick closing basis will challenge the $2,100 barrier. The next target for Gold buyers is envisioned at the all-time high of $2,144 should the uptrend sustain.
The 14-day Relative Strength Index (RSI) indicator has picked up its upside traction while above the midline, pointing to more gains ahead.
Adding credence to the bullish outlook, the 100-day Simple Moving Average (SMA) is on the verge of cutting the 200-day SMA from below, portraying an impending Bull Cross.
However, if Gold sellers fight back control, the initial support is seen at Friday’s low of $2,058, below which the $2,050 round figure could be probed.
The last line of defense for Gold buyers is aligned at the 21-day Simple Moving Average (SMA) at $2,037.
Gold FAQs
Why do people invest in Gold?
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.
Who buys the most Gold?
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.
How is Gold correlated with other assets?
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.
What does the price of Gold depend on?
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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Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
