Gold price remains on track to register weekly losses for the first time in the pervious three


  • Gold price attracts dip-buying amid June Fed rate cut bets and a softer risk tone. 
  • The uptick lacks follow-through amid the uncertainty over the Fed's rate cut path. 
  • Traders look to the US macro data for some impetus ahead of the FOMC next week.

Gold price (XAU/USD) gains some positive traction on Friday and reverses a major part of the previous day's slide back closer to the $2,150 level, or the weekly low. Despite the uptick, the precious metal remains confined in a familiar trading range held since the beginning of this week as traders seek more clarity about the Federal Reserve's (Fed) rate cut path before placing fresh directional bets. Hence, the market focus will remain glued to the upcoming two-day FOMC monetary policy meeting starting next Tuesday. 

In the meantime, the hotter-than-expected US Producer Price Index (PPI) fuelled speculations that the US central bank may delay interest rate cuts in the near term. The markets, however, are still pricing in a greater chance that the Fed will start cutting interest rates in June, which is reinforced by a fresh leg down in the US Treasury bond yields and lends some support to the non-yielding Gold price. That said, a modest US Dollar (USD) uptick should keep a lid on any meaningful appreciating move for the commodity.

Traders now look forward to the US economic docket – featuring the Empire State Manufacturing Index, Industrial Production and the Prelim Michigan Consumer Sentiment Index. This, along with the US bond yields, will influence the USD price dynamics. Apart from this, the broader risk sentiment should contribute to producing short-term trading opportunities around the Gold price. Nevertheless, the XAU/USD seems poised to register modest losses and snap a three-week winning streak to a record peak touched last Friday. 

Daily Digest Market Movers: Gold price lacks firm near-term direction amid Fed rate cut uncertainty

  • Data released on Thursday showed that the US producer prices increased more than expected in February, which might force the Federal Reserve to keep interest rates elevated and prompt some selling around the Gold price.
  • The US Bureau of Labor Statistics reported that the Producer Price Index for final demand rose by a 1.6% YoY rate in February as compared to the previous month's upwardly revised print of 1% and the 1.1% market estimates.
  • Separately, the US Department of Labor (DOL) published the usual Initial Jobless Claims data, which showed that the number of individuals filing for unemployment insurance for the first time unexpectedly fell to 209K last week.
  • This, to a larger extent, overshadowed softer US Retail Sales figures, which rose by 0.6% in February and pointed to a slowdown in consumer spending during the first quarter amid rising inflation and high borrowing costs.
  • Meanwhile, the CME Group's FedWatch Tool indicates that the markets are still pricing in about a 60% chance that the Fed will cut interest rates at the June policy meeting, helping limit losses for the non-yielding yellow metal.
  • Investors turn more cautious over the possibility of more hawkish signals from the Fed, which is evident from a generally weaker tone around the equity markets and lends additional support to the safe-haven XAU/USD.
  • Russia moved tactical nuclear weapons from its borders into neighbouring Belarus, closer to NATO territory, after President Vladimir Putin threatened a wider military showdown with NATO over the alliance's backing for Ukraine.
  • Traders now look to Friday's US economic docket – featuring the release of the Empire State Manufacturing Index, Industrial Production figures and the Preliminary University of Michigan Consumer Sentiment Index.
  • The focus, however, will remain glued to the upcoming FOMC monetary policy meetings, starting next Tuesday, which might provide fresh cues about the Fed's rate-cut path and determine the near-term trajectory for the metal.

Technical Analysis: Gold price bulls not ready to give up yet, $2,150 support holds the key

From a technical perspective, the range-bounce price action since the beginning of the current week comes on the back of the recent blowout rally and might still be categorized as a bullish consolidation phase. The lower boundary of the said trading range near the $2,152-2,150 area might continue to protect the immediate downside. A convincing break below could drag the Gold price to the next relevant support near the $2,128-2,127 zone. The corrective slide could extend further towards the $2,100 round figure, which should act as a strong base for the XAU/USD.

On the flip side, the $2,178-2,180 region now seems to have emerged as an immediate strong barrier, which if cleared should allow the Gold price to challenge the record peak, around the $2,195 area touched last week. Some follow-through buying beyond the $2,200 mark will be seen as a fresh trigger for bullish traders and set the stage for the resumption of a well-established uptrend witnessed since the beginning of this month.

US Dollar price this week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the New Zealand Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.58% 0.89% 0.39% 0.84% 0.99% 1.22% 0.80%
EUR -0.58%   0.31% -0.19% 0.26% 0.41% 0.64% 0.23%
GBP -0.90% -0.32%   -0.51% -0.05% 0.12% 0.33% -0.09%
CAD -0.40% 0.18% 0.50%   0.44% 0.57% 0.82% 0.40%
AUD -0.85% -0.26% 0.05% -0.45%   0.15% 0.41% -0.04%
JPY -1.00% -0.45% 0.13% -0.61% -0.16%   0.22% -0.21%
NZD -1.23% -0.65% -0.34% -0.85% -0.39% -0.25%   -0.43%
CHF -0.81% -0.22% 0.09% -0.41% 0.04% 0.18% 0.42%  

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

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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