Gold price keeps the red as risk sentiment remains buoyed by bets for an end of Fed's rate-hiking cycle
- Gold price comes under some selling pressure on Monday and extends Friday’s pullback from the post-NFP swing high.
- The upbeat market mood, along with a modest recovery in the US bond yields, drive flows away from the yellow metal.
- The USD languishes near a multi-week low amid bets that the Fed is done raising rates and should lend some support.
- Geopolitical tensions might further contribute towards limiting any meaningful downfall for the safe-haven XAU/USD.
Gold price (XAU/USD) kicks off the new week on a weaker note and extends Friday's retracement slide from the $2,004 area or a multi-day high touched in reaction to softer jobs data from the United States (US). The prevalent risk-on environment – as depicted by a strong follow-through rally in the equity markets – is seen as a key factor weighing on the safe-haven precious metal. Apart from this, a modest pickup in the US Treasury bond yields further contributes to driving flows away from the non-yielding yellow metal closer.
The US Dollar (USD), meanwhile, languishes near a six-week low amid expectations that the Federal Reserve (Fed) is done raising interest rates, which should keep a lid on any meaningful upside for the US bond yields. This, in turn, favours the USD bears and assists the US dollar-denominated Gold price to find some support near the $1,980 level. This, along with the risk of a further escalation in the Israel-Hamas conflict, should limit losses for the XAU/USD and warrants caution before positioning for any meaningful corrective slide from the YTD peak touched on October 27.
Daily Digest Market Movers: Gold price maintains its offered tone, though the downside remains cushioned
- The US Dollar stages a modest recovery from a six-week low touched on Friday and draws support from a goodish pickup in the US Treasury bond yields, which, in turn, is seen weighing on the Gold price.
- Firming expectations that the Federal Reserve will not hike rates again, bolstered by the softer US macro data released on Friday, should keep a lid on any meaningful appreciating move for the Greenback.
- The headline NFP showed that the US economy added 150K jobs in October as compared to 180K estimated and the previous month's reading was also revised down to 297K from 336K reported originally.
- The US ISM Non-Manufacturing PMI fell to a five-month low level of 51.8 in October from 53.6 the previous month, reaffirming bets that the Fed will maintain the status quo again at the December policy meeting.
- On the geopolitical front, Israel on Sunday rejected growing calls for a ceasefire in Gaza and said that Israeli forces are set to intensify their operations against the Palestinian Islamist group, Hamas.
- Israel's chief military spokesperson said the military had attacked terrorist targets of Hezbollah in southern Lebanon in response to a missile attack against tanks that killed an Israeli citizen.
- Hezbollah said it responded by firing rockets at the town of Kiryat Shmona in northern Israel and said that it would never tolerate attacks on civilians and its response would be "firm and strong".
- Lebanon's militant group chief Hassan Nasrallah said that his Iran-backed group was not afraid of US warships and all options were open for an expansion of the conflict into Lebanon.
Technical Analysis: Gold price stalls the intraday downfall near the $1,980 support zone
From a technical perspective, any subsequent downfall below the $1,980 level is likely to find decent support near last week's swing low, near the $1,970 region. Some follow-through selling will make the Gold price vulnerable to slide further towards the $1,964 area en route to the next relevant support to the $1,954-1,953 zone.
On the flip side, the $2,000 mark could act as an immediate barrier ahead of Friday's swing high, around the $2,004 area and the YTD peak, around the $2,009 region. A sustained strength beyond the latter has the potential to lift the Gold price further towards the $2,022 resistance zone.
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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.10% | -0.14% | -0.11% | 0.01% | 0.07% | -0.01% | -0.21% | |
| EUR | 0.09% | -0.05% | -0.02% | 0.10% | 0.17% | 0.08% | -0.13% | |
| GBP | 0.14% | 0.04% | 0.02% | 0.13% | 0.20% | 0.11% | -0.08% | |
| CAD | 0.11% | 0.02% | -0.02% | 0.11% | 0.18% | 0.09% | -0.10% | |
| AUD | 0.00% | -0.09% | -0.16% | -0.12% | 0.08% | -0.02% | -0.20% | |
| JPY | -0.09% | -0.18% | -0.44% | -0.18% | -0.08% | -0.11% | -0.30% | |
| NZD | 0.01% | -0.06% | -0.11% | -0.15% | 0.02% | 0.09% | -0.18% | |
| CHF | 0.21% | 0.12% | 0.08% | 0.08% | 0.20% | 0.28% | 0.19% |
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.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
