- Gold gathered bullish momentum but erased its weekly gains heading into the weekend.
- The near-term technical is yet to highlight a buildup of bullish momentum.
- Investors will keep a close eye on geopolitics and US data next week.
After a calm start to the week, Gold (XAU/USD) broke out of its tight trading range on Thursday and climbed to a two-week-high above $2,360. The persistent USD strength ahead of the weekend, however, caused the pair to erase its gains. Investors will remain focused on geopolitical headlines and key data releases from the US next week.
Gold sellers remain active
Following the previous week’s decline, the benchmark 10-year US Treasury bond yield edged higher on Monday as Federal Reserve (Fed) officials adopted a cautious tone on policy easing, not allowing Gold to stretch higher. Minneapolis Fed President Neel Kashkari said over the weekend that it would be a “reasonable prediction” that the Fed will wait until December to cut interest rates, adding that the central bank is in a very good position to get more data before making any decisions. Additionally, Philadelphia Fed President Patrick Harker noted that the Fed may need to keep rates where they are for longer than markets currently hope.
On Tuesday, disappointing macroeconomic data releases from the US made it difficult for the US Dollar (USD) to gather strength and helped XAU/USD hold its ground. The US Census Bureau reported that Retail Sales rose only 0.1% in May, while Retail Sales ex Autos declined 0.1%. Both of these readings fell short of market expectations.
With the US markets remaining closed in observance of the Juneteenth Holiday on Wednesday, trading volumes thinned out and Gold failed to make a noticeable move in either direction, closing the day virtually unchanged.
Geopolitical tensions re-escalated on Thursday on reports of Israel’s army approving an offensive against Lebanon and stating that they are ready for an ‘all-out war’ in response to increasing cross-border fire. In turn, Gold gathered bullish momentum and advanced to its highest level in two weeks, above $2,360. Meanwhile, the data from the US showed that the weekly Initial Jobless Claims edged lower to 238,000 in the week ending June 15 from 243,000 in the previous week.
On Friday, the USD stood resilient against its peers on the back of upbeat data and caused XAU/USD to erase Thursday’s gains. S&P Global Manufacturing PMI in the US rose to 51.7 in June’s flash estimate from 51.3 in May, while the Services PMI advanced to 55.1 from 54.8, showing an ongoing expansion in private sector’s business activity at a robust pace.
Gold investors await US data while assessing geopolitics
In the first half of next week, the US economic calendar will not offer any high-impact data releases that could potentially impact Gold’s valuation in a significant way. Hence, investors will remain focused on headlines surrounding the Middle East conflict. A further escalation of geopolitical tensions could allow Gold to gather bullish momentum.
On Thursday, the US Bureau of Economic Analysis (BEA) will release the final revision to the first-quarter Gross Domestic Product growth. On Friday, the BEA will publish the Personal Consumption Expenditures (PCE) Price Index data for May, the Fed’s preferred gauge of inflation.
Investors are likely to react to the monthly core PCE inflation reading, which excludes prices for volatile items, such as food and energy, and is not distorted by base effects. In April, the core PCE Price Index rose 0.2%. A reading of 0.2%, or lower, could revive expectations for a Fed rate cut in September and cause the USD to come under selling pressure. On the other hand, a reading of 0.3%, or higher, could trigger a rally in the US Treasury bond yields and force XAU/USD to push lower heading into the weekend.
Gold technical outlook
The Relative Strength Index (RSI) indicator on the daily chart climbed above 50 for the first time in two weeks on Thursday but retreated back toward this level on Friday. Additionally, Gold failed to push higher despite closing above the 20-day and the 50-day Simple Moving Averages (SMA) on Thursday, reflecting the lack of bullish momentum.
$2,340-$2,345 (20-day SMA, 50-day SMA) aligns as a pivot area for XAU/USD. In case Gold stabilizes above this area, $2,380 (static level) could be seen as next resistance before $2,400 (psychological level, static level).
On the downside, sellers could target $2,300 (psychological level, static level) and $2,285 (static level) if Gold starts using $2,340-$2,345 as resistance.
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 drops toward 1.0600 on unabated US Dollar demand
EUR/USD drops toward 1.0600, extending its decline for a third consecutive day early Tuesday. The pair remains undermined by tariffs threat likely under US President-elect Donald Trump and on increased bets for ECB rate cuts. Germany's ZEW survey and Fedsepak are awaited.
GBP/USD falls further to test 1.2800 after UK employment data
GBP/USD intensifies its downside momentum, attacking 1.2800 after the UK labor data showed that the ILO Unemployment Rate jumped to 4.3% in quarter to September versus a 4.1% print expected. The losses could be capped by hot wage inflation. Focus shifts to Fedspeak amid sustained US Dollar strength.
Gold price slides below $2,600 for the first time since September 20 on stronger USD
Gold price continues losing ground through the first half of the European session on Tuesday and slips below the $2,600 mark for the first time since September 20. Investors continue to pile into the so-called Trump trade, which lifts the US Dollar to over a four-month peak.
BNB Price Forecast: Bullish technical pattern validated, eyes all-time high
Binance Coin trades slightly down on Tuesday after breaking above an ascending triangle formation on the weekly chart, following a 12.5% rally last week. The technical outlook suggests a bullish breakout pattern and continuation of the rally, with a target set for a new all-time high of $825.
Five fundamentals: Fallout from the US election, inflation, and a timely speech from Powell stand out Premium
What a week – the US election lived up to their hype, at least when it comes to market volatility. There is no time to rest, with politics, geopolitics, and economic data promising more volatility ahead.
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.