- Gold price stands tall near a two-month high touched on Friday.
- Subdued USD demand and a softer risk tone underpin the metal.
- This week’s US data/event risks should provide a fresh impetus.
Gold price (XAU/USD) attracts some buyers for the fourth successive day on Monday and trades near its highest level since December 28 touched on Friday. Friday's disappointing release of the US ISM Manufacturing PMI and the University of Michigan’s Consumer Sentiment Index, along with less-hawkish remarks by Federal Reserve (Fed) officials, reaffirmed bets for a June rate cut. This, in turn, keeps the US Dollar (USD) bulls on the defensive and acts as a tailwind for the yellow metal.
Apart from this, a softer tone around the US equity futures is seen as another factor benefitting the safe-haven Gold price. The upside, however, remains capped as traders seem reluctant to place aggressive directional bets and look for more cues about the Fed's rate-cut path. Hence, investors will closely scrutinise Fed Chair Jerome Powell's congressional testimony, which, along with the US Nonfarm Payrolls (NFP) on Friday, should provide some meaningful impetus to the XAU/USD.
Daily digest market movers: Gold price remains supported by Fed rate cut bets, subdued USD demand
- The US Dollar remains on the defensive in the wake of Friday's disappointing US macro data and less-hawkish remarks by Federal Reserve officials, which is seen acting as a tailwind for the Gold price.
- The ISM survey showed that business activity in the US manufacturing sector contracted more quickly than anticipated in February, with a measure of employment dropping to a seven-month low.
- The US ISM Manufacturing Index fell to 47.8 from 49.1 in January amid a decline in the New Orders Index to 49.2, while the Prices Paid Index edged lower to 52.5 from 52.9 in the previous month.
- Adding to this, the University of Michigan’s Consumer Sentiment Index also missed estimates and dropped to 76.9 in February, though inflation expectations were in line with the expectations.
- Chicago Federal Reserve President Austan Goolsbee noted that the policy rate is quite restrictive, and Dallas Fed President Lorie Logan said that it would be appropriate to slow the pace of the balance sheet shrinking.
- Fed Governor Adriana Kugler noted that progress on disinflation will continue, and Richmond Fed President Thomas Barkin said that overall inflation is likely to come down over the next few months.
- Furthermore, Fed Governor Christopher Waller said that he would like the central bank to boost its share of short-term Treasuries, exerting some downward pressure on the US Treasury bond yields.
- A softer risk tone also lends support to the safe-haven XAU/USD amid subdued US Dollar demand, though the upside seems limited ahead of the key US data and Fed Chair Jerome Powel's testimony.
Technical analysis: Gold price bulls have the upper hand while above $2,060-2,062 resistance breakpoint
From a Technical perspective, Friday's breakout through the $2,062-2,064 horizontal barrier was seen as a fresh trigger for bullish traders and supports prospects for additional gains. That said, the Relative Strength Index (RSI) on the daily chart is hovering near the overbought zone and holding back bulls from placing fresh bets. This makes it prudent to wait for some near-term consolidation before positioning for an extension of a nearly three-week-old uptrend.
In the meantime, the aforementioned resistance breakpoint, around the $2,064-2,062 region, now seems to protect the immediate downside. Sustained weakness below, however, might prompt aggressive technical selling and expose the 50-day Simple Moving Average (SMA) support, currently pegged near the $2,034 area. The latter should at as a key pivotal point, which if broken decisively will negate the positive outlook and shift the bias in favour of bearish traders.
On the flip side, the $2,088 zone, or over a two-month high touched on Friday, now seems to act as an immediate hurdle ahead of the $2,100 round figure. Some follow-through buying has the potential to lift the Gold price further towards the $2,025-2,030 intermediate hurdle en route to the all-time peak, around the $2,144-2,145 zone touched early December.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.03% | -0.04% | 0.05% | 0.11% | 0.04% | 0.09% | -0.07% | |
| EUR | 0.02% | -0.02% | 0.07% | 0.13% | 0.06% | 0.12% | -0.04% | |
| GBP | 0.05% | 0.02% | 0.09% | 0.15% | 0.09% | 0.14% | -0.02% | |
| CAD | -0.05% | -0.06% | -0.09% | 0.06% | -0.01% | 0.04% | -0.10% | |
| AUD | -0.11% | -0.13% | -0.15% | -0.06% | -0.07% | -0.01% | -0.17% | |
| JPY | -0.04% | -0.07% | -0.12% | -0.01% | 0.06% | 0.04% | -0.11% | |
| NZD | -0.09% | -0.12% | -0.14% | -0.05% | 0.01% | -0.06% | -0.16% | |
| CHF | 0.07% | 0.04% | 0.02% | 0.12% | 0.17% | 0.10% | 0.16% |
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).
Fed FAQs
What does the Federal Reserve do, how does it impact the US Dollar?
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
How often does the Fed hold monetary policy meetings?
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
What is Quantitative Easing (QE) and how does it impact USD?
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
What is Quantitative Tightening (QT) and how does it impact the US Dollar?
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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