Gold price gains traction, investors await US data, Fedspeak for fresh catalyst

  • Gold price holds positive ground in Thursday’s early European session. 
  • The rise in global gold demand, persistent central bank purchasing, and safe-haven flows might continue to boost the precious metal. 
  • Investors will monitor the US weekly Initial Jobless Claims and the Fed’s Daly’s speech on Thursday. 

Gold price (XAU/USD) trades with a positive bias on Thursday amid the absence of top-tier economic data releases at mid-week. However, multiple headwinds, such as the firmer US Dollar (USD) and the hawkish comments from the US Federal Reserve (Fed) are likely to cap the upside of the precious metal in the near term. 

On the other hand, the growth in global gold demand was mainly driven by strong over-the-counter market investment, persistent central bank purchasing, and rising demand from Asian buyers, including China and India, per the WGC's most recent report. Furthermore, the risk-averse environment and the uncertainties surrounding geopolitical tensions in the Middle East might boost traditional safe-haven assets like gold. 

Gold traders await some fresh catalysts. The US weekly Initial Jobless Claims is due on Thursday. Also, San Francisco Fed President Mary Daly, in the dovish wing of the US central bank, is set to speak later in the day. The dovish remarks from Fed officials might cap the downside of the gold price for the time being. 

Daily Digest Market Movers: Gold price remains strong amid the multiple headwinds

  • Boston Fed President Susan Collins said it will take longer than previously thought to bring inflation down to the 2% target, emphasizing that the rate will likely stay higher for longer. 
  • New York Fed president John Williams and Minneapolis Fed president Neel Kashkari also indicated that they favor holding rates at current levels for longer.
  • Investors have priced in a nearly 55% chance of a quarter-percentage-point rate cut from the Fed in September, down from 85% before the US employment report last week, according to CME's FedWatch Tool.
  • The first reading of the University of Michigan Consumer Sentiment Index is expected to drop from 77.2 in April to 76.0 in May.
  • Hamas has agreed to a draft ceasefire agreement that is "far from meeting Israel's demands, according to Israeli Prime Minister Benjamin Netanyahu. 
  • The People's Bank of China (PBoC) increased its gold reserves by 60,000 troy ounces in April, extending its streak of consecutive purchases to 18 months. 

Technical Analysis: Gold price keeps the bullish vibe in the longer term

The gold price edges higher on the day. The yellow metal's long-term outlook remains positive, with XAU/USD trading above the key 100-day Exponential Moving Average (EMA) on the daily chart

In the near term, the gold price has been caught in a descending trend channel since mid-April. The consolidative theme remains intact as the 14-day Relative Strength Index (RSI) hovers around the 50-midline. 

The initial support level for the precious metal is seen near the $2,300 psychological mark. The next contention level is located at the lower limit of a descending trend channel of $2,260. Extended weakness could drag XAU/USD to a low of April 1 at $2,228, followed by the $2,200 round level.  

If we see enough gold demand, the yellow metal could head for a high of May 6 at $2,232. Further north, gold may draw in enough buyers to test the upper boundary of a descending trend channel at $2,345. The additional upside filter to watch is the $2,400 round mark, en route to an all-time high near $2,432. 

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 Canadian Dollar.

USD   0.07% 0.09% 0.05% 0.13% 0.21% 0.15% 0.06%
EUR -0.07%   0.03% -0.01% 0.09% 0.11% 0.08% 0.00%
GBP -0.10% -0.02%   -0.03% 0.06% 0.08% 0.06% -0.03%
CAD -0.05% 0.01% 0.04%   0.08% 0.15% 0.10% -0.01%
AUD -0.13% -0.09% -0.06% -0.09%   0.01% 0.00% -0.09%
JPY -0.22% -0.11% -0.08% -0.12% -0.02%   0.00% -0.11%
NZD -0.15% -0.08% -0.06% -0.10% -0.01% 0.05%   -0.09%
CHF -0.06% 0.01% 0.03% 0.00% 0.08% 0.11% 0.09%  

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.


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