Gold price extends its consolidative price move below record high, $2,200 remains in sight
- Gold price struggles to capitalize on last week’s blowout rally to a fresh record peak.
- Overbought conditions cap gains for the metal ahead of the US inflation on Tuesday.
- Bets for a Fed rate cut in June act as a headwind for the USD and should limit losses.
Gold price (XAU/USD) enters a bullish consolidation phase and oscillates in a narrow band below the $2,200 mark, closer to the record peak through the early European session on Monday. The downside, meanwhile, remains cushioned in the wake of rising bets that the Federal Reserve (Fed) will start cutting interest rates at the June policy meeting. The expectations were reaffirmed by a spike in the US unemployment rate. This, in turn, leads to a further decline in the US Treasury bond yields, which keeps a lid on any meaningful US Dollar (USD) recovery from its lowest level since mid-February and continues to act as a tailwind for the non-yielding yellow metal.
Apart from this, geopolitical tensions stemming from conflicts in the Middle East and the Russia-Ukraine war, along with concerns about a global economic downturn, continue to act as a tailwind for the safe-haven Gold price. Bulls, however, seem reluctant to place fresh bets amid extremely overbought conditions on the daily chart and ahead of the release of the latest US consumer inflation figures on Tuesday. The crucial CPI report will play a key role in influencing expectations about the Fed's rate-cut path. This, in turn, will drive the US Dollar (USD) demand in the near term and help investors in determining the next leg of a directional move for the XAU/USD.
Daily Digest Market Movers: Gold price pauses after the recent record setting rally, downside potential seems limited
- Data released on Friday revealed that the US unemployment rate rose to its highest level in two years, lifting bets for a June rate cut by the Federal Reserve and pushing the Gold price to a fresh record high.
- The headline NFP showed that the US economy added 275 new jobs in February as compared to the 200K estimated, though the previous month's reading was revised down to 229K from the 353K reported.
- Adding to this, wage inflation, as measured by the change in the Average Hourly Earnings, rose by 4.3% on a yearly basis, also falling short of market expectations and January's growth of 4.4%.
- The possibility of a May interest rate cut by the Fed climbed to around 30% after the crucial jobs report, though the June policy meeting is still the most likely expected timing for any such move.
- The yield on the 10-year US government bond dived to a more than one-month trough, dragging the US Dollar to its lowest level since mid-January and benefitting the non-yielding metal.
- A modest USD uptick prompts some intraday sellers during the Asian session on Monday, albeit firming expectations for an imminent shift in the Fed's policy stance should help limit losses.
- Furthermore, geopolitical tensions, along with expectations that the global economy could weaken in 2024, might continue to drive flows towards the safe-haven XAU/USD and act as a tailwind.
- Investors now look forward to the release of the latest US consumer inflation figures on Tuesday for fresh cues about the Fed's rate-cut path and before positioning for the next leg of a directional move.
Technical Analysis: Gold price consolidates below $2,200 mark, bulls not ready to give up yet despite overbought RSI
From a technical perspective, last week's breakout through the previous record high, around the $2,144 area, favours bullish traders and supports prospects for additional gains. That said, the Relative Strength Index (RSI) on the daily chart is flashing extremely overbought conditions and makes it prudent to wait for some near-term consolidation or a modest pullback before placing fresh bullish bets.
Any meaningful corrective slide, however, is more likely to find decent support near Friday's swing low, around the $2,154 region, which should now act as a key pivotal point for intraday traders. A convincing break below might prompt some technical selling and drag the Gold price further towards the $2,125 intermediate support en route to the $2,100 round figure. On the flip side, bulls might now wait for a move beyond the $2,200 mark, above which the XAU/USD will enter uncharted territory and build on its recent strong gains registered over the past month or so.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.01% | 0.02% | -0.01% | 0.15% | 0.14% | 0.09% | 0.00% | |
| EUR | -0.01% | 0.03% | -0.04% | 0.15% | 0.13% | 0.08% | -0.01% | |
| GBP | -0.02% | -0.01% | -0.04% | 0.13% | 0.12% | 0.07% | -0.01% | |
| CAD | 0.02% | 0.03% | 0.04% | 0.16% | 0.14% | 0.11% | 0.01% | |
| AUD | -0.15% | -0.15% | -0.14% | -0.17% | -0.02% | -0.06% | -0.15% | |
| JPY | -0.12% | -0.13% | 0.13% | -0.16% | 0.03% | -0.03% | -0.14% | |
| NZD | -0.09% | -0.09% | -0.07% | -0.11% | 0.06% | 0.04% | -0.09% | |
| CHF | 0.00% | 0.02% | 0.03% | -0.01% | 0.16% | 0.12% | 0.10% |
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.
