- Gold drops to $2,399, down 1.50%, after hitting a high of $2,447.
- Concerns over China's economic growth and Trump's election prospects boost the Greenback.
- US Dollar Index rises to 104.34, up 0.18%; US Treasury yields climb, with 10-year note at 4.233%.
Gold price sinks by more than 1.50% on Friday and hovers around $2,400 as traders book profits ahead of the weekend. The golden metal could finish the week with losses close to 1% after hitting an all-time high of $2,483 and trading at around the $2,300 handle. The XAU/USD exchanges hands at $2,399 after reaching a high of $2,447.
Trader sentiment is gyrating due to several factors. China’s economy is growing less than expected, and an increasing rumble that former President Donald Trump might win the November 5 elections boosted the Greenback, which is set to end the week with gains of more than 0.26%, according to the US Dollar Index (DXY).
Besides that, reports emerged that US President Joe Biden could pull out of the race as high-level democrats said polls following Trump’s assassination attack show that he can’t beat him.
In the meantime, Federal Reserve policymakers continued to turn slightly dovish yet failed to undermine the US Dollar. Nevertheless, the International Monetary Fund (IMF) said on Thursday that the Fed should not cut interest rates until late 2024.
The US Dollar Index, which tracks the currency's performance against six other currencies, is up 0.18% at 104.34. US Treasury bond yields are also rising across the yield curve, with the 10-year Treasury note yielding 4.233%, up more than three basis points (bps).
Daily digest market movers: Gold price tanks below $2,400
- Weaker-than-expected US Consumer Price Index (CPI) data boosted Gold prices above $2,400, as the increased likelihood of Fed rate cuts led to falling US Treasury bond yields.
- This week’s data featured mixed Retail Sales reading, a slowdown in Industrial Production, and the increase of Americans filling for unemployment benefits, reinforcing the Fed’s rhetoric that its dual mandate has become more balanced.
- December 2024 fed funds rate futures contract implies that the Fed will ease policy by 50 basis points (bps) toward the end of the year, up from 50 last Friday.
- Investors will focus on speeches from Fed policymakers: New York Fed President John Williams and Atlanta Fed President Raphael Bostic are scheduled to speak during the New York session.
Gold technical analysis: XAU/USD tumbles beneath $2,400 as buyers stay on the sidelines
Gold prices are experiencing a pullback, signaling that traders continued to take profits after an 8% rally experienced since June 27. Although the Relative Strength Index (RSI) remains bullish, in the near-term momentum favors sellers. The RSI has experienced a vertical fall, though shy of piercing the 50-neutral line.
Therefore, XAU/USD first support would be the July 5 high at $2,392, followed by the psychological 50-day Simple Moving Average (SMA) at $2,357. The next support would be $2,350, followed by the 100-day SMA at $2,312
Otherwise, if XAU/USD stays above $2,400 and reclaims $2,450, that can pave the way to challenge the all-time high of $2,483 ahead of hitting $2,500.
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.
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
Editors’ Picks
GBP/USD climbs back closer to 1.3100, upside seems limited ahead of UK data/US CPI
GBP/USD attracts some buyers on Wednesday amid a modest USD decline. The fundamental backdrop warrants before placing aggressive bullish bets. Traders might also prefer to wait for the release of the crucial US CPI report.
EUR/USD trades around 1.1050 after halting a three-day losing streak, US CPI eyed
EUR/USD breaks its three-day losing streak, trading around 1.1050 during Wednesday’s Asian session. The upside of the pair is attributed to the subdued US Dollar ahead of the US Consumer Price Index data scheduled to be released later in the North American hours.
Gold buyers try their luck again heading into US inflation showdown
Gold price is consolidating a two-day uptrend above $2,500 in Wednesday’s Asian trading. Gold buyers take a breather, with the next directional move likely triggered by the critical US Consumer Price Index data due later this Wednesday.
Bitcoin breaks above $56,000 resistance level
Bitcoin price approaches a critical support level; if it holds, it might pave the way for further recovery. However, Ethereum and Ripple find rejection around their resistance level and could be poised for declines, diverging from BTC’s potential rebound.
Five Fundamentals for the week: Jittery markets fear the ECB, US inflation and more Premium
Is there still a chance? Investors hope for a 50-bps rate cut from the Fed but also fear a global recession is underway. The world's three largest economies, the US, China, and the eurozone, are set to rock global markets.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.