Gold price remains capped in a familiar trading range ahead of US Services PMI data
Most recent article: Gold recovers as global interest-rate expectations fall
- Gold price manages to hold its neck above a multi-week low touched on Monday.
- Fed rate cut bets cap the attempted USD recovery and lend support to the metal.
- Traders now look to the US ADP report and ISM Services PMI for a fresh impetus.
Gold price (XAU/USD) attracted some sellers on Tuesday and dropped to the $2,316-2,315 area, back closer to a multi-week low touched the previous day in the wake of a modest US Dollar (USD) strength. The attempted USD recovery from over a two-month low, however, lacked follow-through on the back of growing acceptance that the Federal Reserve (Fed) will start cutting interest rates later this year, bolstered by softer US macro data. The expectations keep the US Treasury bond yields depressed, which, in turn, is seen benefitting the non-yielding yellow metal during the European session on Wednesday.
Apart from this, geopolitical risks stemming from the ongoing conflicts in the Middle East lift the safe-haven Gold price back closer to the 50-day Simple Moving Average (SMA). Despite a combination of supporting factors, the XAU/USD remains confined in a one-week-old trading range as investors seem reluctant to place aggressive directional bets and prefer to wait for the release of the crucial US monthly employment details, or the Nonfarm Payrolls (NFP) report on Friday. In the meantime, the US ADP report on private-sector employment and the US ISM Services PMI should provide some impetus later today.
Daily Digest Market Movers: Gold price draws support from weaker USD, Fed rate cut bets
- The US Dollar staged a modest bounce from over a two-month low touched on Tuesday and exerted downward pressure on the Gold price, though dismal US macro data helped limit losses.
- The Job Openings and Labor Turnover Survey, or JOLTS report, showed that job openings fell more than expected, by 296K to 8.059 million in April, or the lowest in more than three years.
- This follows the disappointing release of the US ISM Manufacturing PMI on Monday, which showed a surprising weakness in business activity and pointed to signs of a cooling US economy.
- Meanwhile, there is a risk that the US economy might be softening more than anticipated cemented bets for a September rate cut by the Federal Reserve, dragging the US Treasury bond yields lower.
- The rate-sensitive two-year US government bond and the benchmark 10-year Treasury yield languish near a two-week low, capping the USD and lending support to the non-yielding yellow metal.
- Traders now look forward to Wednesday's US economic docket, featuring the release of the ADP report on private-sector employment and the ISM Services PMI to grab short-term opportunities.
- The focus, however, remains glued to the official monthly employment data, popularly known as the Nonfarm Payrolls report, which will determine the next leg of a directional move for the XAU/USD.
Technical Analysis: Gold price needs to move above $2,350 hurdle for bulls to seize back control
From a technical perspective, the Gold price now seems to have found acceptance below the 50-day Simple Moving Average (SMA). Moreover, oscillators on the daily chart have just started gaining negative traction and support prospects for further losses. A subsequent slide below the multi-week low, around the $2,315-2,314 area touched on Tuesday, will reaffirm the bearish bias and drag the XAU/USD below the $2,300 mark, towards testing the $2,280 horizontal support. Some follow-through selling will be seen as a fresh trigger for bearish traders and pave the way for an extension of the recent corrective decline witnessed over the past two weeks or so.
On the flip side, any meaningful upside now seems to confront stiff resistance near the $2,349-2,350 supply zone. The next relevant hurdle is pegged near the $2,360-2,364 area, which, if cleared decisively, should allow the Gold price to climb further towards the $2,385 intermediate hurdle en route to the $2,400 mark. The momentum could extend towards the $2,425 zone and eventually lift the XAU/USD to the $2,450 region, or the all-time peak touched in May.
US Dollar price in the last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the strongest against the .
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.23% | -0.13% | 0.23% | -0.14% | -0.84% | -0.76% | -2.28% | |
| EUR | 0.21% | 0.11% | 0.47% | 0.09% | -0.62% | -0.53% | -2.04% | |
| GBP | 0.13% | -0.09% | 0.37% | -0.03% | -0.72% | -0.66% | -2.17% | |
| CAD | -0.24% | -0.45% | -0.35% | -0.41% | -1.10% | -1.04% | -2.55% | |
| AUD | 0.14% | -0.07% | 0.03% | 0.38% | -0.70% | -0.64% | -2.10% | |
| JPY | 0.84% | 0.61% | 0.72% | 1.06% | 0.67% | 0.10% | -1.43% | |
| NZD | 0.76% | 0.56% | 0.66% | 1.03% | 0.62% | -0.07% | -1.52% | |
| CHF | 2.21% | 2.04% | 2.12% | 2.49% | 2.09% | 1.41% | 1.48% |
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.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
