• Gold price hits $2,390, its highest level in three weeks, gaining over 1%.
  • US Treasury bond yields plunge, US Dollar Index drops to five-week low.
  • April Retail Sales stagnate, while Fed officials express concerns about restrictive monetary policy.

Gold price extended its uptrend for the second straight day on Wednesday and hit a three-week high of $2,390 after data revealed by the US Bureau of Labor Statistics (BLS) showed inflation is ebbing, increasing the odds for a Federal Reserve (Fed) rate cut in 2024. Hence, US Treasury bond yields are plunging, while the Greenback tumbles to a five-week low as depicted by the US Dollar Index (DXY).

The XAU/USD trades at $2,384 and gains more than 1%. Despite standing above 3% on an annual basis, consumer inflation slowed in monthly figures, easing pressure on the Fed. US Treasury yields along the short and long ends of the curve are diving between 8 and 10 basis points.

Other data announced by the US BLS witnessed a deterioration in consumer spending, as Retail Sales in April remained unchanged at 0% MoM, below estimates of a 0.4% increase.

Elsewhere, Fed officials continued to make headlines. Minneapolis Fed President Neel Kashkari said that with higher government debt, it might take higher borrowing costs in the near term to achieve 2% inflation. He said he’s surprised by consumers' spending and added that the big question is “how restrictive monetary policy is.”

Daily digest market movers: Gold shines amid dropping US yields as rate cut expectations rise

  • Gold prices are underpinned by lower US Treasury yields and a battered US Dollar. The US 10-year Treasury note yields 4.352% and is down 9 basis points (bps) from its opening level. DXY falls 0.66% to 104.33.
  • On Tuesday, Fed Chair Jerome Powell commented that he expects inflation to continue heading lower but wasn’t as confident about the disinflation outlook as he had previously been.
  • BLS reveals that April’s Consumer Price Index rose by 0.3% MoM, below estimates and March’s 0.4%. Core CPI rose by 0.3% MoM as expected but beneath the prior reading of 0.4%.
  • Other data showed that Retail Sales missed estimates of 0.4% and came at 0% MoM, below March’s 0.6%. In the twelve months to April, Retail Sales grew by 3%, below the 3.8% increase of the previous reading.
  • Further data will be featured during the week, led by Initial Jobless Claims and Industrial Production on May 16.
  • The New York Federal Reserve released its monthly Survey of Consumer Expectations on Monday, showing that the year's inflation expectations increased to 3.3% vs. 3% in March. The data came after the University of Michigan Consumer Sentiment poll showed that inflation expectations for a one-year outlook rose from 3.2% to 3.5%.
  • Interest rate cut expectations toward the end of the year edged up from 35 basis points on Tuesday to 42 bps, according to data provided by the Chicago Board of Trade.

Technical analysis: Gold price clears May 10 high, on its way towards $2,400

Gold price’s rally was prolonged for the second straight day, yet it was shy of challenging the $2,400 figure. Once buyers surpassed $2,378, the May 10 high paved the way for a new trading range within the $2,380 to $2,400 range.

Momentum favors buyers as the Relative Strength Index (RSI) remains bullish with readings above 60. Therefore, the path of least resistance is upward.

That said, the XAU/USD first resistance would be $2,400. Once surpassed, the immediate supply zone would be the April 19 high at $2,417, followed by the all-time high at $2,431.

Conversely, if sellers moved in and pushed prices below $2,359, that could sponsor a leg down toward the May 9 low of $2,306, followed by the $2,300 figure. Once surpassed, the next stop would be the 50-day Simple Moving Average (SMA) at $2,249.

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.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD extends slide below 1.0700 on stronger USD, EU political angst

EUR/USD extends slide below 1.0700 on stronger USD, EU political angst

EUR/USD stays under bearish pressure and trades at its lowest level since early May below 1.0700. Unabated US Dollar demand amid risk aversion and looming EU political uncertainty exert downside pressure on the pair heading into the weekend.

EUR/USD News

GBP/USD slumps to multi-week lows below 1.2700

GBP/USD slumps to multi-week lows below 1.2700

GBP/USD extends its decline on Friday and trades at its lowest level in nearly a month below 1.2700. In the absence of high-tier data releases, the US Dollar continues to benefit from souring market mood, forcing the pair to stretch lower in the second half of the day.

GBP/USD News

Gold clings to recovery gains at around $2,330

Gold clings to recovery gains at around $2,330

Following Thursday's pullback, Gold holds its ground on Friday and trades in positive territory near $2,330. The benchmark 10-year US Treasury bond yield edges lower toward 4.2%, helping XAU/USD push higher ahead of the weekend.

Gold News

Monero price poised for a downward correction

Monero price poised for a downward correction

Monero price has encountered resistance at a critical level. The technical outlook suggests a potential short-term correction as momentum indicators signal a bearish divergence.

Read more

Week ahead – RBA, SNB and BoE next to decide, CPI and PMI data also on tap

Week ahead – RBA, SNB and BoE next to decide, CPI and PMI data also on tap

It will be another central-bank-heavy week with the RBA, SNB and BoE. Retail sales will be the highlight in the United States. Plenty of other data also on the way, including flash PMIs and UK CPI.

Read more

Forex MAJORS

Cryptocurrencies

Signatures